Ying v Song

HER HONOUR : This matter involves a dispute between former family members over shares in the second defendant (Budget Scaffold Supplies Pty Ltd, to which I will refer as BSS) and in respect of amounts recorded at one stage in the financial records of BSS as a shareholder loan from the plaintiff (Ming Ying) to the company.

Ming Ying’s sister (Hua Ying) was formerly married to the first defendant (Lida Song). There are Family Court proceedings presently on foot between the couple (that I was told have been stayed pending the outcome of these proceedings). Mr Song explains the family relationship as the reason for his involvement in the events which have led to the present dispute with his former brother-in-law, Ming Ying.

There is a stark difference in the version of the relevant events proffered by Ming Ying and that proffered by Lida Song. According to Ming Ying, he paid some $106,025 to acquire shares in BSS, shares which Lida Song later transferred back to himself, without Ming Ying’s consent, in 2005. (Ming Ying, in these proceedings, seeks declaratory relief in relation to those shares and in relation to $106,000 of the funds he says he paid to the company for their acquisition and other funds he says were later provided to the company (in the order of some $30,775). According to Lida Song, however, the shares were only transferred to Ming Ying (and the company’s records recorded shareholder loans by Ming Ying) as part of an attempt to present a false impression of Ming Ying’s assets in Australia to the Department of Immigration so as to assist in Ming Ying’s attempt to obtain permanent residency in Australia.

What seems not to be in dispute is that, at some stage in 2002, Lida Song transferred to Ming Ying 25 shares which Mr Song then held in BSS and that, at the same time as the share transfer form in respect of those shares was signed, a second share form was also signed by Ming Ying (to be used if and when those shares were to be transferred back to Lida Song).

There was initially a dispute as to the time at which the initial transfer of shares was effected but by the time of the hearing it was accepted by Ming Ying that, although the share transfer form was dated 15 July 2002 (the date of incorporation of BSS), the transfer of shares to him did not take place until late 2002 (somewhere around October, November, December 2002). What remains in dispute is what was agreed between the brothers-in-law as to the circumstances in which the shares would be transferred back to Lida Song (if at all).

Ming Ying (whose evidence at various times was inconsistent on a number of matters, including as to critical points of the relevant conversation in 2002 with Lida Song) at first seemed to suggest that he had signed only one share transfer form but later accepted that he had signed two such forms. He has variously attributed to Mr Song a number of explanations for the request that he sign the second share transfer form. (In his first affidavit of 12 July 2006, and in his affidavit of 31 July 2008 (re-sworn on 1 July 2009), Ming Ying says that he was asked by Lida Song to sign the blank transfer form in case he (Ming Ying) failed to pay a sum of $100,000 in relation to the share transfer. He says in his affidavit of 5 November 2009 that Lida Song said that the (second) transfer form was for use in case Ming Ying had to return to China (which was at that stage a possibility, depending on the outcome of Ming Ying’s application for permanent residency) in order to protect Ming Ying’s ‘investment’ in BSS. The inconsistency between those two versions was explained by a third version of the relevant conversation in which both reasons were put forward – it being variously suggested that they were concurrent reasons or successive reasons (ie in the latter version that first it was for security in the event of non-payment of the $100,000 but that after the $100,000 was paid, the share transfer form was then only to be used if Ming Ying had to return to China).)

Lida Song, on the other hand, says that the purpose of the second signed share transfer form was to enable him to regain his shares after Ming Ying’s visa application had been determined and that the shares were simply “borrowed” by Ming Ying for the purpose of deceiving the Department of Immigration into believing that Ming Ying had established assets in Australia in support of Ming Ying’s application for a business residency visa.

There is no dispute that, in late 2005, Lida Song caused the transfer back into his name of the shares in question by completing and signing a share transfer form and providing it to BSS’s accountant (Stephen Poon). Curiously, it seems that Lida Song did so by using a copy of the transfer form which had been signed on the initial share transfer to Ming Ying (ie, as I understand it, not by using a blank signed form also signed on that date but by altering the copy form signed by Ming Ying in 2002) to which he applied liquid paper in order to transpose the names of transferor and transferee and which he dated 7 August 2005. (The original of the share transfer form was not in evidence. Mr Poon gave evidence to the effect that he had seen a share transfer form to which liquid paper had been applied but that the lodgment of the share transfer details took place electronically when the annual return was lodged and it appears that it is not his practice to retain the original documentation after the relevant details have been lodged electronically.)

Lida Song accepts that he effected the transfer of the shares back into his name at a time when the “special purpose” of deceiving the Department of Immigration had not yet achieved a result (ie when Ming Ying still had not obtained a permanent visa) but says he did so following a threat by Hua Ying and/or Ming Ying that he would be excluded from the company and the shares would not be returned to him. For Ming Ying, it is contended that the re-transfer of the shares was for the purpose of Lida Song drawing back into his control all the assets he could in circumstances where there was a marital dispute with his then wife.

Lida Song says that he told Ming Ying what he was doing in 2005 and Ming Ying said that was OK. Ming Ying says that he did not authorise the share transfer to Lida Song in 2005 and that he has received no payment for that transfer. (Both the 2002 and the 2005 share transfer forms record the consideration for the shares at $25.)

In these proceedings, Ming Ying contends that Lida Song now holds the 25 BSS shares on trust for him. (The basis of that claim was not, unfortunately, articulated by way of any pleading.)

Ming Ying also seeks the return from BSS (on alternative and inconsistent bases) of the moneys paid to BSS in 2002 that he says were for the acquisition of the shares. According to Ming Ying, the amount he paid in relation to the shares transferred to him by Lida Song in 2002 totalled $106,025 in all (that being the $25 cash he says he paid by way of the consideration noted on the share transfer form and a further amount of $106,000, the characterisation of which varied during the course of the hearing but which ultimately seemed to be put, on Ming Ying’s case, as a payment made by way of loan to BSS, that being said to be a condition of Lida Song’s agreement to transfer the shares to him). Lida Song denies receipt of the $25 (the amount of which equates to the par value for the shares) and denies that Ming Ying paid the sum of $106,000 to him (or by way of a loan to BSS), though Mr Song accepts that an amount of $106,000 was provided to (or “parked in”) BSS by Ming Ying and that the payment was recorded in the company’s books as a shareholder loan.

While it is accepted that Ming Ying provided a cheque in the sum of $106,000 (note, not the $100,000 referred to in the initial account of the relevant conversation) to BSS on about 31 January 2003, there is a dispute as to what it represented and whose funds were the source of that payment. If that sum represented part of the consideration for the purchase of Lida Song’s shares then one might have expected it to be paid directly to Lida Song. It could, of course, have been paid to BSS at the direction of Lida Song (by way of working capital, for example) and still have represented consideration to Lida Song for the purchase. However, that is not what is contended. Rather, what seems to be suggested is that the consideration for the share transfer involved the making of a loan to BSS (repayable on some undisclosed terms at an undisclosed time – perhaps on reasonable notice). If so, that assumes that Lida Song was prepared, in effect, to make a gift of the BSS shares to Ming Ying (since the only benefit Lida Song could have received from the provision of working capital or investment in BSS would be if he remained as a shareholder and could have a share in the distribution of company profits but, after the transfer of the shares, on Ming Ying’s account of events, Lida Song would have no expectation to receive back the shares at any later time).

What seems ultimately to be contended by Ming Ying (at least by the time of the closing submissions put by Ms Winfield of Counsel acting for Ming Ying) was that the payment to BSS in 2003 of $106,000 represented the satisfaction by Ming Ying of a condition imposed on him by Lida Song as part of the share transfer transaction, namely a condition that Ming Ying provide a loan to BSS in that amount in consideration for the transfer of the shares by Lida Song to him. Ming Ying does not, in his evidence, suggest that there was any discussion with Lida Song (or anyone else in BSS) in 2002 as to the terms of any such loan (ie as to the repayment terms or any interest payable on the loan) nor was there any apparent consideration provided by BSS for the loan.

In both the Summons and the Amended Summons, reference is made to various entries in the financial records of BSS (which disclose the balance of Ming Ying’s loan account with the company as being, as at 2003, $104,310; as at 2004, $123,443; and as at 2005, $17,970) as showing funds paid into the company by or on behalf of Ming Ying. Ming Ying claims the balance of moneys said to be owing on the loan accounts.

Lida Song's explanation of the recording (in the company’s books) of a loan account in Ming Ying's favour in the sum of $104,310 (as was said to be the case in respect of the share transfer to Ming Ying) is that these entries were part of a sham arrangement to create the false appearance that Ming Ying had substantial assets, and investments in an ongoing business, in Australia in order to assist his application for a business class visa.

For the reasons set out in an interlocutory judgment in these proceedings, I refused an application made on behalf of Lida Song, at the close of the plaintiff’s case, in advance of his affidavit being read in the proceedings, for a s 128A certificate to be issued in relation to this evidence. I acceded to an application, not opposed for Ming Ying, for the substantive hearing to be adjourned pending an application for leave to appeal from that ruling, given its import for the way in which Mr Song might conduct his defence of the proceedings. Hence there was, unfortunately, some delay in the completion of the hearing (delay having already been occasioned at an earlier stage by the difficulty apparently encountered by the plaintiff in having his evidence properly translated and certified). However, in considering the matters for judgment I have had the benefit not simply of the transcript of the proceedings but also of my contemporaneous notes taken during the course of the oral evidence and of the demeanour of the witnesses (see generally Hadid v Redpath (2001) 35 MVR 152 at 159 [34] per Heydon JA; Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 at 33 [73]; Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at 742 [43] per Hunt AJA; NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 at 504 [109]-[111] per Kirby J, at 525 [169] per Callinan and Heydon JJ).

Also in issue in the proceedings is a sum (variously put at $30,770 and $30,775) paid by Ming Ying to BSS on or about 18 September 2003, which Ming Ying says is repayable to him and has not been repaid by BSS. As to this amount, Lida Song says that this money was paid by Ming Ying for the purposes of contributing to a fund to be paid (through BSS) to a company in China in order to make a payment to secure the release of Hua Ying from prison in China where she was then being held (either as a bribe or as some form of bail payment) and that there is no obligation on the part of BSS to refund those moneys. Hua Ying accepts that she was in prison in China for a period but says that she was detained there as a witness. Ming Ying denies that the payment in question was for the purpose asserted by Lida Song. Basis for relief claimed

A constant difficulty throughout the hearing was in identifying precisely the basis on which the relief sought in these proceedings by Ming Ying is said to arise. (Indeed, there appeared to be a stark contrast between what Ming Ying said in the witness box as to his claim against the company in relation to the $106,000 and the basis on which his case was both opened and closed by Ms Winfield – who seemed to concede the inconsistency but to explain it by reference to her better characterization of the legal consequences of the facts to which Ming Ying had attested.)

Complaint was made more than once by Counsel for Lida Song (Mr Lawson) as to the confusion in respect of what was actually claimed by Ming Ying as the basis for the relief outlined in the Amended Summons. On more than one occasion, I also (largely unsuccessfully) attempted to clarify precisely what was being alleged as the basis for the claim. When I did so on the resumption of the part-heard hearing in September this year, Ms Winfield’s response was that the answer was to be found in the affidavits and to assure me that the plaintiff’s claim would be clarified in closing submissions.

With respect, it does not seem to me that it is in accord with the manner in which litigation is expected to be conducted in this Court for the legal basis on which relief is sought to be left for the opposing party to discern from a myriad of what were contradictory affidavits and with the benefit of articulation from the party seeking the relief only in closing submissions (even if, which regrettably was not the case here, the matter had been so clarified at that stage).) I note that in White v Overland [2001] FCA 1333, at [4], the public interest in the open identification of the issues in proceedings was recognized by Allsop J (as his Honour then was) who observed that “In the long run, the only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimately have to be borne by someone”, a passage which has since received the approval of the New South Wales Court of Appeal in Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346, at [28] and [46].)

The confusion was exacerbated by the lack of any pleadings. It is not apparent to me (particularly having regard to the basis on which the trust claim was ultimately sought to be put by Ming Ying) why this matter was not properly pleaded at least once it became apparent that Ming Ying was raising matters going to the alleged wrongful conduct of Lida Song in the use of the share transfer form to re-transfer the shares into Mr Song’s name. The Rules require specific pleading of matters that may take the defendant by surprise (Part 14.14 of the Uniform Civil Procedure Rules, 2005 (NSW)) and in particular of matters such as fraud (Part 14.14(3)) and require that there be proper particularization of allegations not only of fraud but also of breach of trust or wilful default (Part 15.3). They do so for the purpose of ensuring that each party has a proper opportunity to appreciate the case it has to meet and to be in a position properly to prepare its case.

Ms Winfield acknowledged more than once that this was a matter that should probably have been commenced by Statement of Claim (T 1.79, T 490.18). She seemed to suggest that, having adverted to the need for pleadings at the time (not identified) that she became involved in the matter (which I infer must have been at a stage after the initial summons had been filed), this had not been acceded to by the defendants. It is, of course, incumbent on a plaintiff properly to prosecute its claim, whether or not the defendant requires it to do so. Moreover, there is nothing before me to suggest that the defendants had resisted any application by the plaintiff that the matter proceed by way of pleadings.

Had it been apparent to me at the outset of the hearing, or even at the time it was adjourned part-heard, that what was sought to be put was a claim for relief based on an alleged wrongdoing on Mr Song’s part as an alleged fiduciary (rather than, as I had then understood it, as a claim alternatively based on a loan or a share sale transaction), then I would have been inclined to order pleadings at that stage (so as to elucidate the allegations made and the actual basis on which the relief was sought.) At the very least, it would have been appropriate for Points of Claim to be filed – to avoid a situation of the kind that ultimately arose, namely that at the conclusion of the hearing in the course of closing submissions it was asserted for the first time that Mr Song owed fiduciary obligations to his former brother-in-law (as a ‘self-appointed’ fiduciary) and it was suggested (though only faintly and then expressly disavowed) that there had been some misappropriation (or wrongful use) by Mr Song of funds or of “property” in the form of the blank share transfer form (so as to give rise to a constructive or resulting trust by analogy with cases such as Black & Black v S Freedman & Company [1910] HCA 58; (1910) 12 CLR 105.)

The Quistclose trust, on which Ming Ying now relies as the basis for the declaratory relief sought in relation to the BSS shares, was not articulated in opening (and indeed the only hint that could be said to have been given that such a claim might be made was that which might have been found in the list of authorities handed up at the commencement of the hearing, though that seemed to be a broad brush collection of authorities relating to constructive or resulting trusts without particular reference to the claim as ultimately put).

In that regard, I find apposite the comment by Bryson J (as his Honour then was) in Idemaneo (No 123) P/L v Ticco P/L and Anor [2003] NSWSC 538 (at [1]): These proceedings were commenced by Summons dated 1 March 2002 and the claims now appear in Amended Summons of 7 June 2002. The Amended Summons has over six pages of claims for orders and alternatives. There were no pleadings, and this caused considerable difficulty as there were many contested issues of fact and the issues were too complex to be readily recognised on reading the parties’ affidavits in chief. If I had understood the complexity of the case in advance I would not have allowed it to go to trial without pleadings. For all the written definition of issues I had I might as well have been a District Officer adjudicating ownership of a pig under a tropic palm . (my emphasis)

I raise this because, in due course, it will be necessary to consider the submission by Mr Lawson that, having regard to the manner in which the case was opened, Ming Ying should be confined to the claims he has made for relief on the basis of the case as opened and not on the basis of some other case that was articulated at the close of the hearing and after Ming Ying and his sister had been cross-examined on the case as then understood by the defendant (based, inter alia, on the matters raised in opening).

Therefore, before identifying the issues now before me for determination, I set out how it was that Ming Ying’s claims were articulated over the course of the proceedings. Plaintiff’s claims as variously put Summons – July 2006

The proceedings commenced by way of Summons in July 2006. At that time, the relief claimed related solely to the 25 shares in BSS. A declaration was sought that Lida Song held those shares on trust for Ming Ying. (The nature of the trust was not identified.) Ming Ying also sought that Lida Song account to him for all benefits received from BSS in his (Lida Song’s) capacity as holder of the 25 shares and that he do all things necessary to transfer the shares back to Ming Ying. Amended Summons – September 2007

An Amended Summons was filed some 14 months later, in which the claims for relief were significantly expanded. Apart from the relief sought in relation to the alleged trust over the 25 shares (and the consequential relief which had been sought in that regard), as set out above (repeated in paragraphs 1, 2 and 3 of the Amended Summons, consistently with the relief sought in the original claim), additional claims were made for: (i) a declaration that BSS holds on trust for Ming Ying the sum of the difference between the balance of the amounts said to have been lent to BSS ($104,000 and $30,775) less the stated balance of Ming Ying’s loan account in BSS (that being $17,970 as at 30 June 2005) (paragraph 4 of the Amended Summons) (ie seemingly seeking to reinstate what is said to be the correct balance of Ming Ying’s shareholder loan account in the company, but invoking a trust in favour of Ming Ying for that alleged debt, the basis of which trust was not identified other than by way of the ‘removal’ of funds corresponding to the amended loan account entry in the company’s books and records); and (ii) an order that BSS account to Ming Ying for all benefits received from the use of those sums (paragraph 5).

Pausing there, and leaving aside for the moment the discrepancy between the $104,000 claimed to represent Ming Ying’s shareholder loan as at 2003/4 and the $106,000 said to have been paid in January 2003 by way of loan to BSS), it is hard to see the basis on which a trust is said to have arisen in respect of the bulk of the moneys in question if (as is contended for by Ms Winfield, though seemingly disavowed by her client) the underlying arrangement between Ming Ying and Lida Song in relation to the monies paid to BSS was that they were to be a loan to the company nor, indeed, why the company should in those circumstances account for the benefits of what has been done with the alleged borrowings).

If, as between Ming Ying and BSS, the payment of these separate amounts was no more than pursuant to a loan arrangement, then it is not clear how it is suggested that a borrower who fails to repay money lent to it has more than a liability in debt for the amount so borrowed (whatever the borrower may have done with that money in the interim), at least absent any particular arrangement that takes the matter beyond a debtor/creditor relationship. In that regard, I note what might have been thought to be obvious, namely that a loan is ordinarily understood to be an “advance of money coupled with a contract for its repayment” (Fisher J Potter v Potter [2003] 3 NZLR 145, at [13]; [2003] NZFLR 1035, where it was noted (at [13]) that the intention of the parties is usually that ownership in the funds passes to the borrower and the lender is left with an in personam right, secured or unsecured, of repayment.)

Thus, in Twinsectra Ltd v Yardley [2002] All ER (D) 321 (Mar); [2002] UKHL 12; [2002] 2 AC 164; [2002] 2 All ER 377; [2002] 2 WLR 802, Lord Millett noted (at [68]) that money advanced by way of loan normally becomes the property of the borrower, stating: He is free to apply the money as he chooses, and save to the extent to which he may have taken security for the repayment, the lender takes the risk of the borrower in insolvency.

Nor was it made clear how it is asserted that if Mr Song, as a director of BSS, improperly directed the amendment to the company’s financial statements so as to remove the acknowledgement contained therein of a debt owing to Mr Ying and withdrew funds from the company in that amount to pay what is said to have been a personal debt to a third party, that gives rise to a trust by the company itself in respect of the funds in question (or any obligation on the part of the company to repay those funds other than by way of the alleged underlying loan transaction).

Unfortunately, it does not seem that the plaintiff’s case ever squarely grappled with those difficulties.

Returning then to the relief sought in the Amended Summons, in paragraph 6 of the Amended Summons, Ming Ying has sought the appointment of a referee (stated to be for the purposes of orders 3 and 5, ie for the purpose not only of the orders sought that Lida Song account for all benefits received from BSS in his capacity as shareholder of the 25 shares but also for the purpose of the claim that BSS account to Ming Ying for all of the benefits it received from the use of the money allegedly lent to it).

The appointment of the referee is sought for the stated purposes of taking accounts and enquiring into all dealings and transactions by or in relation to BSS (including loan accounts); the assets and liabilities of BSS; the respective interests of the parties in BSS; and amounts (if any), owing to Ming Ying in relation to the sums lent to the company by Ming Ying. Orders are then sought that the “Defendant” (by which Ming Ying presumably refers to Lida Song) pay the fees of the referee. Paragraphs 8 and 9 of the Amended Summons seek consequential relief following the referral of the proceedings to the referee.

Paragraph 10 of the Amended Summons, said to be an alternative to paragraphs 4 and 5 (those earlier paragraphs being the ones seeking a declaration and order in relation to the holding by BSS of sums of money on trust for Ming Ying), seeks an order that the “Defendant” (again, presumably Lida Song) forthwith cause BSS to pay to Ming Ying (and an order that BSS pay to Ming Ying) the sum of $104,000 (the stated loan balance as at 2003), plus interest from 31 January 2003, and $30,775, plus interest from 17 September 2003, less $17,970 (being the stated balance of Ming Ying's loan account as at 30 June 2005). (Presumably, the only capacity Lida Song would have to procure or cause BSS to do this would be in his capacity as a director of the company, given the limitations or the ability of a shareholder to exercise control over a company’s affairs; and it is noted by Mr Lawson that Lida Song is not the sole director.)

It was submitted by Mr Lawson (and herein lies the genesis of his complaint as to the basis on which the case was put in closing by Ms Winfield) that the claim advanced in the Amended Summons could therefore reasonably be seen as being limited to a claim that Lida Song held 25 shares in BSS on trust for Ming Ying and that BSS was in breach of a loan agreement and owed money to Ming Ying. While I note that this might explain order 10, that order was itself stated to be an alternative to orders 4 and 5 (which, as I say, seek declarations as to a trust over the monies the subject of the alleged loans). Therefore, it is by no means clear that the claim so advanced should be read in that way. Moreover, insofar as Mr Lawson submitted that the claim could be seen as a claim in the alternative (ie, either for the BSS shares or recovery of the moneys in question), this does not seem to be the case based on the relief as specified.

That said, Ms Winfield did on various occasions seem to suggest (as did Mr Ying in the witness box) that the relief sought was either for the 25 BSS shares or for the money paid to acquire them (whether the latter be from the company or from Mr Song). It was not until well in the hearing that it was made clear that what Mr Ying was then asserting was an entitlement both to the shares and to recover the $106,000 that he says he paid (albeit that Ms Winfield says he so paid by way of a loan to BSS) to acquire those shares. (If that contention were to be correct then in effect what Ming Ying says is that he was entitled to the shares for no more than nominal consideration, ie the $25 par value, or as a gift from Mr Song. There was nothing to suggest such philanthropy on the part of Lida Song.) Principal Contentions of Fact and Law – 1 July 2009

In a document headed Principal Contentions of Facts and Law, dated 1 July 2009, Ming Ying’s contentions, relevantly, are summarised as: (i) in relation to the shares: [9] Lida Song holds 25 shares in BSS on constructive or resulting trust for Ming Ying; [10] alternatively [and I emphasise this was put in the alternative] BSS holds the amount of $106,000 on constructive or resulting trust for Ming Ying; (ii) in relation to the funds paid into the company: [12] BSS holds $106,000 on constructive or resulting trust for Ming Ying [and while this appears on its face to be a cumulative, and not alternative, claim to that made in relation to the shares in (i); the difficulty in this regard is that the claims identified in paras [10] and [12] must logically be in the alternative and not cumulative, since there was no suggestion that there were two sums of $106,000 paid or credited to the company at any stage. Therefore, one might be forgiven for thinking that this too was in the alternative to the claim made in para [9]] ; and (iii) Ming Ying is entitled to an account on a wilful default basis for “of the profits to date”. Statement of Issues – 30 June 2009

Ming Ying’s Statement of Issues dated 30 June 2009 (provided in accordance with the usual pre-trial directions) raised the following factual and legal issues, not all of which appear to be mirrored in the Contentions referred to above: 1. Whether Lida Song holds 25 shares in BSS “for” Ming Ying [ This was put ultimately as a constructive trust invoking what was said in Quistclose, but was not identified as such in the Contentions or otherwise at this stage] 2. Whether Ming Ying obtained the shares by subscription at the time BSS was formed on 15 July 2002 [ While some of the evidence suggested that this was in issue, Mr Ying himself was adamant in the witness box that he had not acquired any shares in BSS by subscription at the time the company was formed on 15 July 2002 but acquired his shares later in 2002 ] 3. Whether Lida Song transferred 25 shares to Ming Ying to hold in trust for Lida Song while Ming Ying’s permanent residence application was considered [ I note that none of the parties has contended that this is the case – Lida Song’s contention is, rather, that the shares were transferred to Ming Ying – and I take that to mean that the beneficial interest in the shares was conveyed to him at the time – but as part of a sham arrangement in that Ming Ying had agreed that the shares would be transferred back to Lida Song when the latter chose to do so ] 4. Whether Ming Ying paid $260,000 into BSS from his own funds 5. Whether BSS holds $106,000 on trust for Ming Ying or whether that sum has been repaid to Ming Ying [ those apparently being put forward as alternatives ] 6. Whether BSS holds $30,770 on trust for Ming Ying or whether that sum has been repaid to him [ again, those apparently being put forward as alternatives ] 7. What is the true balance of Ming Ying’s loan account with BSS 8. Whether Ming Ying knew that Lida Song intended to transfer the 25 shares back to himself in the circumstances and at the time that he did 9. Whether Lida Song had Ming Ying’s consent to transfer the shares back to himself 10. Whether Lida Song had Ming Ying’s consent “to liquid paper” the share transfer document in order to transfer the 25 shares back to him 11. In the event that a sum of money is found to be owing to Ming Ying, whether there should be a taking of accounts to determine: (a) whether Lida Song and BSS or either of them has received a benefit from retention of the funds; and (b) whether Ming Ying has suffered loss arising from the retention of that money; and if so, whether any accounting should be on a common fund or wilful default basis. (issues 3 and 7 not being directly raised in the plaintiff’s Principal Contentions of Fact and Law). Opening Submissions

In oral opening submissions, on 2 July 2009, Ms Winfield said (at T 1.40): It is a case about shares in a company and monies lent to a company which is now the second defendant in the proceedings. The plaintiff was issued shares in a company for which he says he paid $106,000 . There is an oddity about that, in that the [par] value of the shares is $25, and it shows up as paid up capital on the company accounts as $100,000 for the 100 shares but he paid $106,000. Either the money was lent to the company and is repayable or the $25 for the shares is still owing to [sic] the company and it is simply a loan that is owing by the company . I do not see that as a big issue in the matter. (my emphasis)

Ms Winfield went on to say: In 2003 the plaintiff says that, at the time the shares were issued, he signed a transfer to the first defendant in case, he says, the money [presumably the sum of around $100,000 referred to in the conversation as initially alleged, although various figures have been referred to in that regard including $104,000 and $106,000] was not paid because at the time the shares are dated 15 July 2002 but he did not actually pay the money until January 2003. He says that he signed a blank share transfer form in case the money was not paid . The money was subsequently paid, $106,000 and $154,000 in two cheques. So, $260,000 was paid to the company on 31 January 2003. Subsequently, the $154,000 [an amount which singularly does not feature in the alleged agreement for the transfer of shares in the first place] was repaid to him with some interest that had accrued on it, as it had been kept in a term deposit, and that was repaid to him in April 2003. So that by the time one looks at the 2003 Budget Scaffold documents, there is a loan account in favour of the plaintiff from the company of $104,310. How, exactly, that is calculated and why it is less than $106,000 is not known, and there is no explanation from the company about that. … However, at the end of 2005, the plaintiff says, without his knowledge and consent, the shares were transferred to the first defendant. The plaintiff did not receive the [par] value of the shares. He did not receive $25 for them and he never received the $106,000 that he says he paid in 2003. [I interpose to note that I had understood, from the complaint that Mr Ying had not received the $106,000 paid in 2003, that it was being suggested that Lida Song was in breach of an agreement for the purchase back of the shares at that price and hence that it was being suggested that there was a trust over the shares pending completion of the sale by the payment of the purchase consideration – akin to an argument that property did not pass until payment of that amount; though this was not put in so many words. The complaint, nevertheless, was seemingly that Mr Ying had not received any money for the shares as transferred back to Mr Song – a complaint echoed by him when he in due course was cross-examined] He says that he found out from another director of the company, from Huamin Yang that the shares have been transferred. He says the first defendant [Lida Song] had not told him that he was going to transfer the shares to him. (my emphasis) … The issues, then, are whether or not the shares should be transferred back to the plaintiff. The plaintiff says that the defendant held them on trust for him because he has never received any funds for them [thus, again, seemingly a claim based on lack of any consideration for the 2005 transfer of the shares presupposing an agreement for their transfer] and he did not consent to their transfer to the first defendant for that purpose. He consented for another purpose but not for that purpose in 2005. [This might, in hindsight, have been intended to draw attention to the claim for a Quistclose trust but if so it was an oblique reference at best] And, of course, since that time, four years have passed. So, the plaintiff seeks in the alternative that the plaintiff is paid for the shares . What the current value of them would be, nobody would know as a value of the company. The plaintiff does not know. But the plaintiff seeks an accounting in the event that the court finds that the monies are held on trust for him and an accounting of any dividend paid on the shares and use of the benefit that the first defendant has had from the funds and use and benefit that the second defendant has had from the funds, because the plaintiff says that the funds were retained in the second defendant . (again, my emphasis)

I raised at that point the question whether the plaintiff was contending that the sum of $106,000 was a sum payable for the shares or a loan to the company and Ms Winfield (adverting there, it seems, to the difference between the case she was putting and the case Ming Ying was later to assert in the witness box) said that “Although the plaintiff says that he paid $106,000, for the shares, I think the proper construction is that it was a loan, it was treated as a loan to the company in the financial statements.” (T 3.4)

To this point, therefore, it seemed that what was being asserted was that there was a claim that the 25 shares were held in trust by Lida Song for Ming Ying (for failure to pay the purchase consideration), though noting that the transfer had been effected without consent and contrary to an ‘agreed purpose’, and a claim that BSS should account for the benefit of the use of moneys paid (or lent) to it at the time Mr Ying acquired the shares.

When I raised the question as to how an obligation to account for the benefits obtained from a borrowing arose, as opposed to a claim for recovery of the loan, Ms Winfield’s response was: “ Yes, if it is a loan. If it was an investment in the company, for the purchase of the shares, which I do not think is actually a proper construction, then there might be an accounting as to what the value of the shares are. I think that it is, probably, not the proper construction although that is what the plaintiff says actually happened. Of course he is not a lawyer or an accountant. There is that issue as to how the funds were dealt with in the company “ (T 3.28).

In the witness box, the suggestion that there was a loan in respect of the $106,000 was emphatically denied by Ming Ying on more than one occasion (T 106.30; T 106.34; T 107; T 108.11ff; T 109; T 114; T 115.22). At T 106.30, Ming Ying said: It not that BSS owed me that amount of money but I had an agreement with Lida Song to purchase those shares with $106,000 but after that they never paid back at T 106.34, he said: Since I put the money into the company’s account so I said BSS owed me this amount of money but in fact it is Lida Song he owed me this amount. at T 107, having confirmed that he understood the difference between a loan and purchasing something (T 106), Ming Ying said: No this is not money I lent out. I also want to ask a question. If I buy something, I pay the money, but the product that I paid for was taken back I actually received nothing In those circumstances where can I get the justice?

At T 108.11, Ming Ying said: $106,000 is what I paid to purchase the shares. And because I paid his amount of money to BSS so if I received nothing shouldn’t I track back to where I put money to.

Ming Ying’s real complaint, therefore, about which he was imploring the court to give justice seems to be succinctly summarized in his answer at T 108 “I lost both my money and the shares”. In those circumstances, Ming Ying apparently considered that the appropriate remedy was for him to be repaid the money he said that he had paid for the shares (hence the allegation that there was a loan) although, as noted above, what he ultimately seeks is both the money and the shares.

However, what the complaint that he ended up with neither money nor shares ignores is the fact that the claim that has been made by Ming Ying is a claim based not on a failure of consideration for the purchase of the shares (which would admittedly be difficult since there is no dispute that the shares were in fact transferred to him and he had the benefit of them from 2002), nor is it based on a breach of any condition (contractual or otherwise) on which the shares were acquired (ie that the second share transfer form would not be used other than for the specific purpose(s) he now says it was subject), nor is it based on a representation that the second share transfer would not be used other than for a particular purpose.

Rather, it seems to be a claim for recovery of an amount the subject of a loan to the company that Ming Ying himself denies having made (and a claim to the shares as well, though that is put on a different basis).

The explanation given by Ming Ying in the witness box suggests to me that the case now put by him is one that has been fashioned to meet the relief sought, rather than by reference to the underlying facts of the case. In other words, the suggestion that there was a loan to the company seems to be on the basis of an assumption that it should be treated as a loan if Mr Ying did not receive back what he says he paid to acquire the shares (placing weight in this regard on the book entry showing a shareholder’s loan – any such loan having been denied by Mr Ying himself and there being no documentation other than the entry in the financial statements to support such a claim).

(This can be contrasted with what was said in opening submissions, as noted above, by Ms Winfield – and which Mr Ying accepted had been translated to him while he was in court during the opening and with which he had made no complaint – to the effect that the claim was primarily one for breach of a loan agreement and resisting the proposition that the proper construction of events was that the money had been paid to purchase the shares in BSS.)

No reference was made in opening submissions to any amount of $30,770 or $30,775.

Even if it be said (and I accept that this seems likely) that Ming Ying was not in a position to understand the legal consequences of the factual matters asserted in his case, the denial that he lent money to BSS (in light of the basis on which his claim is later made) is troubling and cannot in my view be satisfactorily explained away by reference to any misunderstanding in translation. (Mr Ying did not appear to have any difficulty responding to the questions as translated to him as to the difference between a loan and a purchase – and had there been an issue in the translation of the questions it would surely have been raised by those instructing Ms Winfield, who she was at pains to point out during the evidence were more than capable of understanding what was being put to the witnesses in Mandarin and who appeared to be following the translation closely.) At the very least, Ming Ying’s evidence extracted above disavows any expectation by Ming Ying that the money would be repaid to him which is inconsistent with the existence of a loan.

Ming Ying said that he had paid $106,000 to purchase the shares. His real complaint seems to be that the shares were transferred back to Lida Song and hence that he had paid $106,000 for something the benefit of which is now not retained by him (not a complaint that BSS or Lida Song had any obligation to repay him the $106,000 by way of a loan or otherwise).

When the hearing resumed (after the initial delay occasioned by the difficulties experienced by the plaintiff in having his evidence properly translated and certified in a form that would overcome the objections that had been raised (in my view with substance) by Mr Lawson), Ms Winfield said that the share transfer form was signed in 2003 [Mr Ying’s evidence being first that it was signed in July 2002 and then that it was signed in late 2002 but in any event before 2003 – and on neither case is that asserted]; that there were other earlier proceedings on a statutory demand (no evidence of which was before me) that were withdrawn by way of settlement [it later being clarified that the statutory demand was issued prior to the time at which these proceedings raised any claim for relief in relation to the alleged loan and were restricted to the claim in the Summons in relation to the shares]; and that these proceedings were commenced “in respect of the loan account” and said at T 59.40: That is basically what the case is about. If the money is no longer in the company, the plaintiff says that there is a resulting trust for that $106,000 because the money was put in and has never been paid back, or the shares are still his ” (my emphasis) thus putting the claims for shares/money squarely in the alternative.

When asked how the resulting trust arose (when, on the plaintiff’s case as then being put, there was a loan, Ms Winfield’s response was: When the amount is written out of the books of the company, it is no longer shown as a loan, we say it then becomes a resulting trust. In any event, your Honour does have jurisdiction to find that it was a debt, if you find that it was debt still owed by the company. (T 59.49).

At the conclusion of the plaintiff’s case, Mr Lawson invited the plaintiff to argue a ‘no case to answer’ pursuant to Part 29 rule 10 of the Uniform Civil Procedure Rules in relation to either or both of the claims made in relation to the $106,000 loan or the $30,770 loan. Ms Winfield, on instructions, declined to do so. At that point, the proceedings were adjourned to permit the Court of Appeal to consider my ruling on the s 128A issue. Close of Hearing

The case then resumed for hearing in September this year. Pressed by me again to articulate the basis of her client's claim, on 27 September 2010 Ms Winfield said that it was a claim that Lida Song held 25 shares in BSS on trust for Ming Ying (a claim that had been clear from the outset and so no issue could be taken with this) and that BSS owes money to Ming Ying (under a loan agreement) thus harking back to the Amended Summons (and inconsistent with Ming Ying’s own evidence) but without reference to the alternative claim there made that BSS was a trustee in some capacity of the money said to have been lent to it. Ms Winfield also referred to a claim for “correction of records” (and expanded that to indicate that Ming Ying was seeking an enquiry as to the assets and liabilities of BSS to establish the value of the shares Ming Ying claims are held in trust for him - T 306.6). The trust in relation to shares was said to be either a constructive trust or a resulting trust. The basis on which a trust of either kind had arisen or should be imposed was not identified and nothing was said about any trust of loan moneys.

In his closing submissions, Mr Lawson (with good reason in my view) was critical of the confusion surrounding the articulation of the plaintiff's claim. He contended that the only way the court should approach the matter was to hold Ming Ying rigidly to the relief he had sought (noting that Ms Winfield in her closing written submissions herself had asked the court to have regard to that). Mr Lawson correctly pointed out that no claim has been made for damages for breach of contract (whether that be a contract between Ming Ying and Lida Song for the transfer of BSS shares or a loan agreement between Ming Ying and BSS).

Relevantly, Mr Lawson submitted that Ming Ying should not be permitted to advance a case predicated both upon a declaration that shares were held in trust for him and for damages for breach of a loan arrangement in relation to the $106,000 (as appeared to be put by Ms Winfield on 27 September 2010), when he says the manner in which the case had been opened put these claims in the alternative and when that would be inconsistent with the evidence that Ming Ying himself had given. (In that regard, as illustrated by the above, it is fair to say that there were occasions both when the share/loan claims were put in the alternative and when they were treated in some way as cumulative.) Ultimately, however, it makes no difference whether they are treated as cumulative or alternative claims since neither claim is, in my view, made out on the evidence. Submissions – 30 September 2010

The defendant’s evidence closed on 30 September 2010 and closing submissions were made. Ms Winfield's outline of (closing) submissions dated 30 September 2010 set out Ming Ying’s then contentions in relation to the (rather convoluted) factual background to the dispute, before listing (in paragraphs 34 and 35) a selection of cases (with no explanation as to how it was contended that those cases or the legal principles emerging from them should apply to the facts of this case). Ms Winfield’s list of authorities comprised Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583; (1985) 62 ALR 429; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; (1984) 55 ALR 417; (1984) 58 ALJR 587; (1984) 4 IPR 291; [1984] HCA 64; Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721; [1966] 3 WLR 1009; Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651; [1968] 3 WLR 1097 and Re Vandervell Trusts; White v Vandervell Trustee Ltd [1974] 1 All ER 47 . (In passing, I note that paragraph 15 of these submissions seems to be inconsistent with the first set of contentions as to the payment of $154,000.)

Ms Winfield's written submissions asserted that Lida Song holds 25 shares in BSS on constructive or resulting trust for Ming Ying (at para [41]) and that BSS holds $106,000 on constructive trust or resulting trust for Ming Ying (at para [42]), repeating the contention earlier made in relation to payment of funds into the company but now confining it to the payment of $106,000 (at para [45]). As to the accounting sought, Ms Winfield asserted that Ming Ying is entitled to an account on the wilful default basis “of the profits to date”, relying on Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22 and Jones v Dunkel (1959) 101 CLR 298; [1959] ALR 367; (1959) 32 ALJR 395; (1959) 76 WN (NSW) 278 (in the latter regard, Ms Winfield pointed to a notice of motion which had been filed on behalf of Ming Ying at a much earlier stage of the proceedings seeking discovery of certain financial documents as evidence of attempts to obtain financial information, although I note that that motion was itself dismissed by the court).

The assertion is made that Lida Song has had the use and benefit of Ming Ying's shares from 2005 to date “and received any dividends paid or other benefits on the shares”. (I note in passing that there is no evidence of any dividends having been paid and in fact that the evidence of another director, Mr Huamin Yang, is that there were none paid over the period.) There is no evidence as to what other benefits it might be thought were or may have been received by a shareholder of the company over that period (other than dividends) of which an account could now be sought.

Again, and quite extraordinarily in my view, it is asserted that BSS has had the use and benefit of Ming Ying's funds, being about $106,000 from 31 January and $30,770 from 18 September to date. (Such a submission is extraordinary in that Ms Winfield opened the case on the basis that Ming Ying had lent those sums to the company; she insisted that this was the proper construction of events (contrary to her client’s own evidence); and had accepted, I thought, the force of the observation earlier made that if one or both of the payments in question was a loan to the company, then it was for the company to do what it wished with the funds so borrowed; if so, it is difficult to see why it is that the company should not have been entitled to make use of the funds without having to account for the benefit of those funds.)

When asked, during the course of oral closing submissions, to articulate the basis on which a constructive or resulting trust was said to have arisen from any agreement in relation to the sale by Lida Song of the shares to Ming Ying or from the loan agreement between Ming Ying and BSS (which is what I had then understood Ms Winfield to be then contending were the two claims made), Ms Winfield made a number of oral submissions, namely that: the shares were incorrectly or wrongly transferred back to Mr Song (because the precondition for their transfer had not occurred) ie that the transfer in 2005 was in breach of the conditions in respect of use of the transfer form (T 484.25); the sum of $106,000 represented payment into the company as a condition of the agreement to transfer the shares to Ming Ying (see exchange at T 484.39 – T 485.15); the said payment was to “bring some capital to the company” (T 486.14); the said sum was treated as a loan to the company (since it was recorded as a loan account in the records of the company) (T 486.32); there was not a “legal contract” but an arrangement between the parties (T 486.36); although this was a loan, the company holds those funds on trust “ because the plaintiff made that contribution to the company ” (T 487.41); “It was a loan but when Mr Song took it out of the company, once it was transferred off the books, the company then held it on trust for the loan account in the company in Mr Ying's name.” (T 487.40) The character of the arrangement changed from a loan agreement (under which Mr Ying could have sued BSS for the money) to a resulting trust “ because it is no longer represented in the books of the company that it becomes the company holding the funds on trust to return them to the plaintiff ” (T 489.1); and then sought to address me only on the factual submissions, to look at the law overnight and to provide an amended list of authorities. I directed that any further written submissions be served overnight and that oral argument on any further written submissions take place on what was to be the final of the five days which had been listed for completion of the hearing. (Further) written submissions – 1 October 2010

Ms Winfield duly served a further written outline of submissions. In that further outline, no claim based on a resulting trust was pressed (perhaps surprisingly given the reliance placed by Ms Winfield, inter alia, on a case to which reference was not made in the outline, Robb Evans of Robb Evans & Associates v European Bank Ltd [2004] NSWCA 82; (2004) 61 NSWLR 75, see [112]; see also Samuel John Maloof v MBF Australia Limited [2007] NSWSC 1020 (at [26]) in which it is suggested that the appropriate relief in the circumstances identified in the submissions would be a resulting not constructive trust – though I note that the claim does not here fail for reason of any imprecision in nomenclature).

As noted already, in both the Summons and Amended Summons, Ming Ying has sought a declaration that Lida Song holds the 25 BSS shares on trust for him (that trust was said in submissions to arise because he had not been paid the purchase price for the shares). Ms Winfield’s further written submissions make it clear that Ming Ying now asks the court to find that Lida Song hold the 25 shares on constructive trust for him, that being said to arise because Lida Song used a signed share transfer form (“signed for a specific purpose”) contrary to the specific purpose for which it was given (that purpose being said not to have eventuated in that Ming Ying had not been required to return to China even though he had not yet been granted a s 854 permanent residents visa) to “draw into his control all the assets he could, even it is submitted in this case, assets to which he was not entitled”. The “trigger” for Mr Song’s use of the transfer form was said to be an altercation with Hua Ying on 3 July 2005.

Ms Winfield referred me to the passages in Heydon and Leeming, Jacob’s Law of Trusts , 7 th edn, LexisNexis Butterworths, 2006, (from 255, [1301]) as to constructive trusts where, inter alia, the authors cite Cardoza CJ in Beatty v Guggenheim Exploration Co 122 NE at 380 (1919), to the effect that “when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the benefit of beneficial interest, equity converts him to a trustee” and also noted the authors’ consideration of the remedial character of constructive trust in cases where the trust arises “not so much from breach of an antecedent duty under an established relationship, as from a particular, perhaps isolated, act which at once founds the duty and the breach” (at 263) (the authors there citing, which Ms Winfield also cited, Black v Freedman , at 110; Creak v James Moore & Sons Pty Ltd (1912) 15 CLR 426; (1912) 18 ALR 542; Spedding v Spedding (1913) 30 WN (NSW) 81; Australian Postal Corp v Lutak (1991) 21 NSWLR 584, at 589; Lipman Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, at 565-566; Zobory v Federal Commissioner of Taxation (1995) 64 FCR 86, at 89; (1995) 129 ALR 484, at 487; Australian Broadcasting Commission v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, at [299]-[301] , and passages in Jacobs Law of Trusts referring to Rasmanis v Jurewitsch (1961) 70 SR (NSW) 407; 90 WN (Pt 2) (NSW) 154 , at [1311]).

Ms Winfield concluded at para [a] of her further submissions: Similarly [presumably similarly to the proposition quoted in the preceding paragraph that there does not need to have been a current declaration or order before equity will recognise the prior existence of a constructive trust] in respect of the funds removed from the loan account created in the second defendant. It is submitted that these fall squarely within the concept espoused in Black v Freedman. [I note that there seemed to be an assertion that what had occurred was that there had been a physical withdrawal of moneys by BSS from accounts held in Ming Ying’s favour, the use of which or benefit of which the company had had, although it was also said (and was put to Mr Song) that Mr Song had used the funds to pay Mr Tam for his own personal purposes. The assertion that there has been an incorrect amendment or recording of Ming Ying's loan account in the financial records of BSS of itself might or might not include or involve any physical transfer of funds out of the company or might simply be a notional amendment to the company's records or amounting to a discharge, on paper, of any obligation by BSS to pay moneys out to Ming Ying.]

Further, Ms Winfield asserted in these further submissions (for the first time) that Lida Song “took on the role of adviser and owes [Ming Ying] a fiduciary obligation”. The alleged fiduciary obligation is said to be based on Lida Song's superior knowledge of English and his superior business knowledge. It is said that Lida Song is a “self appointed” fiduciary and, as such, is liable to account not only for the profits received by him by reason of the transfer back to him of the shares in question but also to those he may have received (ie an account on the wilful default basis) relying on Meehan ; so as to be put in position that what would have been the result had the relevant duties of the accounting party been properly discharged (without wilful neglect or default).

Even had I been satisfied (which I am not) that a fiduciary obligation arose in this case, nothing was put before me to indicate what is said to have been the wilful default or neglect by Lida Song in relation to any moneys lent by Ming Ying to the company (although it is said that Mr Song withdrew moneys in that amount to pay Mr Tam and therefore this allegation of wilful default would seem to relate only to the transfer of the shares - presumably an allegation of breach of trust in the transfer by the alleged fiduciary of the shares held on trust to himself).

At this point I considered it necessary to ascertain precisely whether it was contended that there had been any fraudulent conduct, theft or misappropriation on the part of Lida Song (whether of “property” in the share transfer or of the loan funds said to have been “removed” from the loan account created in BSS) particularly given the reliance apparently sought to be placed on the principles enunciated in Black v Freedman .

The reason I pressed for articulation of the basis on which a resulting trust (or by then, constructive trust only) had arisen was that it is (and should have been well understood by Ming Ying’s legal representatives) clear that allegations in the nature of fraud must be properly pleaded and particularised. Allegations of fraud (or fraudulent or wilful breach of trust) are serious allegations. It is an abuse of process to plead or allege fraud without proper particulars. It cannot be the case that one can avoid the need for proper pleading and particularisation of such matters (fraud, wilful breach of trust, wilful default and the like) simply by prosecuting a claim by way of summons and claiming relief by way of a trust. Ms Winfield herself informed me that when she became involved in the matter she had adverted to the need for pleadings. To seek to raise an allegation of fraud at the close of the hearing, in closing submissions (or, as seemingly was the case here, by reference to the content of the closing written submissions) would be a serious matter (see Gzell J in Ehsman v Nutectime [2009] NSWSC 909).

Hence my concern to ensure that the record reflect precisely what Ming Ying was actually now alleging in this regard. After some discussion, Ms Winfield expressly disavowed any allegation of fraud or theft on Mr Song’s part. She based the allegation of unlawfulness or wrongfulness (of the alleged conduct on Mr Song’s part in transferring the shares to himself) solely on the fact that the “purpose” of Lida Song signing the blank share transfer form in 2005 (that document being itself said to be a negotiable instrument) was to procure the re-transfer of shares to himself contrary to the specific purpose for which it is said it was provided.

Ms Winfield said that when the blank share transfer form was signed and provided to Lida Song it was held by him subject to a specific purpose (or Quistclose ) trust (such that property in the transfer form remained in Ming Ying). (A pleading based on a trust of that kind ought also to have been properly pleaded in my view.)

Mr Lawson contended in response that the particular use of the form in 2005 was for the very same purpose for which the form which was provided - ie to effect a transfer of shares - and that all that could be said, if Ms Winfield's submissions were correct, was that there had been a breach of a condition placed on the exercise of the right (ie a claim for the breach of agreement) which it is said could not now be maintained in light of the way in which the case was put in opening.)

Frankly, I consider that the manner in which Ming Ying’s claims for relief have been put before the court (without proper pleadings or particulars and with the nature of the claim being put in varying and contradictory ways both before and during the course of the hearing) most unsatisfactory. It has led to Ming Ying’s claim becoming somewhat of a moveable feast, to say the least. It seems to have been a struggle for the parties to come to grips with (or perhaps more accurately to pin down) what exactly has been alleged by Ming Ying at different points during the hearing, given the vague and contradictory way in which submissions were made on the nature of the relief. I accept the force of Mr Lawson's criticism as to the unfairness of Ming Ying seemingly seeking to change tack at a late stage of the proceedings, after the cross-examination of Ming Ying and his sister, Hua Ying, had taken place (and in circumstances where Mr Lawson says his cross-examination had been based on what had been articulated as the plaintiff's case in the opening submissions).

I note that Ms Winfield seemed in closing submissions to say that the agreement pursuant to which the transfer of shares took place to Ming Ying in the first place was one for the consideration of $25, with a promise on the part of Ming Ying to lend to BSS the sum of $106,000. That seems to be inconsistent (at least in part) with the basis on which the case was opened (to the extent that Ms Winfield initially put the claim simply on the basis that $106,000 had been paid for the shares not as part of any collateral agreement to provide a loan to the company; although I accept that Ms Winfield did raise in the alternative in opening submissions that the money was lent to BSS (and she contended that this was the better view, though conceding that it was not also Ming Ying’s view and it is certainly one that is contradicted by Ming Ying’s own evidence).

As a matter of procedural fairness, it seems to me that Ming Ying should be held to the allegations articulated at the opening of his case (at least where to expand the case beyond those allegations after his (and his sister’s) cross-examination was conducted would prejudice the defendant (accepting that Mr Lawson’s cross-examination must have been with a view to the case as then opened). That is why I have set out in some detail above the manner in which the basis of the claims unfolded during the hearing. It is not as if the plaintiff was not asked, though his Counsel, on numerous occasions to specify the basis on which the claims for relief were made. Therefore, I consider that to the extent that there would be material prejudice to the defendant if the plaintiff were now to be in a position to raise allegations not before pleaded or articulated (such as the allegation that Lida Song owed fiduciary duties or acted wrongly in his capacity as a ‘self appointed fiduciary’), Ming Ying should not be permitted to raise those allegations. (To a lesser extent, I am concerned that there may also be prejudice if the plaintiff’s articulated claims based on a Quistclose trust are able to be pressed, not having clearly been articulated at an earlier stage, though it might be said that the facts on which that claim was based were contained in the affidavits.)

Had the determination of these proceedings turned on those issues, then the manner in which the plaintiff conducted its case would have led me to conclude that it should not be granted relief on the above grounds even if the factual basis for such a relief had otherwise been established. As it turns out, however, I do not need to determine the proceedings on this basis as I am not satisfied that Ming Ying has established the underlying factual basis for his claims for relief in whichever of the ways that they are now put. For completeness, I will indicate briefly my view as to each of the issues raised. Ultimately, given that I have not been able to accept the evidence adduced for the plaintiff as to the circumstances of the BSS share/loan entries, his claim fails whether or not he were to be permitted to raise the additional bases for relief now raised. Issues

The issues that fall to be determined on the case as opened are as follows: (i) Does Lida Song hold 25 BSS shares on (constructive) trust for Ming Ying? (ii) Does BSS hold the sum of $116,800 on (constructive) trust for Ming Ying or alternatively is Ming Ying entitled to repayment of that amount as a loan owing by BSS to him? (iii) If either Lida Song does hold the shares on (constructive) trust for Ming Ying and/or BSS holds the sum of $116,800 on (constructive) trust for Ming Ying, should it account on a wilful default basis for any benefit obtained through use of the funds? Is he obliged to account on a wilful default basis for any benefits he may have received from the ownership of the shares over the relevant period? Summary

For the reasons set out below, I am of the view that: (i) Lida Song does not hold his 25 BSS shares on trust for Ming Ying (constructive or otherwise). (ii) BSS does not hold any moneys on constructive trust for Ming Ying and I am not satisfied that BSS owes Ming Ying any money by way or repayment of the amount of $106,000 provided to it by cheque in January 2003 since I do not accept that the evidence establishes it was a loan to the company. (iii) This question does not arise. Had I been convinced that Lida Song did now hold the shares on constructive trust for Ming Ying then I would have been inclined to hold that Lida Song should account on a wilful default basis for any benefits he may have received from the ownership of the shares over the relevant period, since his conduct in registering the shares in his own name was a deliberate action which in those circumstances would seem to have been in wilful breach of his obligations as trustee. (As I am not satisfied that on any basis BSS would be said to have held the sums the subject of the alleged loan agreement on constructive trust for Ming Ying, there would be no occasion for an account of any benefits it had obtained through use of what, on that hypothesis, would have been loan funds provided to it for its own benefit.)

As they differ somewhat from the above, I answer the issues posed by Ms Winfield in June 2009 as follows: 1. Lida Song does not hold 25 shares in BSS “for” Ming Ying. 2. Ming Ying did not obtain the shares by subscription at the time BSS was formed on 15 July 2002 (and Ming Ying did not ultimately suggest that he did). 3. Lida Song did not transfer 25 shares to Ming Ying to hold in trust for Lida Song while Ming Ying’s permanent residence application was considered – rather, he seems to have transferred the shares on the basis of a promise expectation or understanding that it was open to him to transfer the shares back into his name when he wanted the shares . 4. Ming Ying paid $260,000 into BSS but I cannot be satisfied on the balance of probabilities that he did so from his own funds. 5. BSS does not hold $106,000 on trust for Ming Ying nor am I satisfied that that was an amount paid to it by way of a loan repayable to Ming Ying. 6. BSS does not hold $30,770 on trust for Ming Ying nor am I satisfied that this is an amount that was repayable to Ming Ying. 7. I am unable on the evidence to determine the true balance of Ming Ying’s loan account with BSS nor does it arise on the claims for relief sought. 8. I find that it is more likely than not that as at 2002 Ming Ying knew that Lida Song intended in due course to transfer the 25 shares back to himself. 9. I find that Lida Song did have Ming Ying’s consent to transfer the shares back to himself in due course – I am less convinced that Ming Ying consented to Lida Song actually doing so in 2005. 10. I am unable to conclude on the evidence that Lida Song had Ming Ying’s consent to adopt a particular mode of registering the share transfer (ie by applying liquid paper to the share transfer document in order to transfer the 25 shares back to him) but nor does anything seem to turn on this issue. 11. In the event that I had held that Lida Song held the BSS shares on trust for Ming Ying then I would have been inclined to order that there be an enquiry as to what benefits were in fact received (if any) by Lida Song as a result of that shareholding from the date of transfer to him, and that any accounting for those benefits be on a wilful default basis. I see no basis for any such order against BSS. Background Facts Parties

Ming Ying was born in China. He graduated from Li Ming Engineering Colleague in 1986. He gives his occupation as company director. According to Ming Ying he invested in the stock market in China and sold shares before coming to Australia. (It might therefore be expected that Ming Ying was aware of the difference between acquiring shares and entering into loan agreements – Ming Ying certainly had no hesitation in accepting that he knew the distinction between a loan and a purchase.) Ming Ying gave his evidence largely though an interpreter. He said very early in his cross-examination that his English was not very good (T 67.10).

Ming Ying signed a number of affidavits in the proceedings, even apart from the re-affirmation of various affidavits in the circumstances to which I referred in an earlier interlocutory judgment in these proceedings). There was a large degree of similarity between certain of his affidavits (particularly his first affidavit of 12 July 2006 and his second affidavit of 31 July 1008) but relevantly there were a number of significant differences between the various versions. He has also signed affidavits on 3 August 2009 and 5 November 2009.

The content of the affidavits strongly suggests that a number were prepared by cutting and pasting paragraphs from previous affidavits, which casts some doubt as to whether as at the date that subsequent affidavits were signed they represented the then recollection of the events to which Ming Ying was deposing (and, even if they did, which one represented a complete recollection of the relevant events). Indeed some of the attempts at adducing re-executed affidavits at an earlier stage failed because it was not clear that Mr Ying had done more than confirm that the affidavit before him was one that had been sworn earlier and that he confirmed had been his then recollection at the earlier time). I will turn in due course to some of the inconsistencies in his affidavit evidence.

Hua Ying gave evidence in support of her brother’s version of events. She swore a number of affidavits (though less than her brother did). Hua Ying’s evidence also bore strong similarities across different versions – again suggesting a cut and paste manner of preparation. Hua Ying’s English was also not good (she told me at one stage in her cross-examination that she did not understand English even when it was translated to her). She gave evidence also through an interpreter.

Lida Song also has engineering qualifications. He lived in Hong Kong for some time between 1994 and 1999, during which time (while married to his former wife) he met Hua Ying. Mr Song speaks English relatively well and gave evidence without the assistance of an interpreter.

According to the chronology handed up by Ms Winfield at the commencement of the hearing, in July 1996 Hua Ying and Lida Song were married. Lida Song disagreed that this was when the couple was married. He did, however, seem to accept that from around 1996 or a year or so later the couple had a joint bank account. (Lida Song also accepted that there had been a loan made by Hua Ying to Lida Song and his former wife at some time around then (which he says was repaid), though the relevance of this is not immediately apparent.)

Hua Ying says that after Lida Song’s divorce from his first wife, Lida Song was in need of money and that she had made various contributions of funds to him. The only relevance of this to the issues before me seems to be that, if correct, it provides a reason why Lida Song may have later have sought funds from Ming Ying in relation to his business. However, the evidence as to the various transfers of money from accounts between the three does not enable me to make any conclusive findings in this regard. (In particular, while Ms Ying gave evidence of various transfers to or from her accounts to or for the benefit of Ming Ying, the accounts in general seemed to be accounts jointly held with Lida Song and who ultimately owned the funds (some of which were said to have been taken out of China in cash to Hong Kong) was obscure.)

Ming Ying deposed to the giving of funds in Hong Kong dollars to his sister in early 1998. (Hua Ying also deposes to the receipt of moneys from her brother). Ming Ying says that he transferred monies to and from Hong Kong from that time. Part of the reason for the transfer of funds between accounts was said to be a limit on the amount of funds that could be taken out of China. However, it is not clear why the funds would have been placed into Lida Song’s account if Hua Ying had her own separate account. The evidence of Hua Ying in this regard seemed to have been overstated (perhaps to assist her brother’s case) (at least insofar as Ms Ying gave evidence as to funds being deposited in Hong Kong in terms that she seemed to accept conveyed the impression that she had been physically present there at the time - when her passport suggested to the contrary that she had not been in Hong Kong at that time. I consider the evidence she gave in this regard later in these reasons).

In any event Ming Ying says that he commenced bringing funds into Australia in 1996 (though he said he was not introduced to Lida Song until some time later). (There seems to be some discrepancy in Ming Ying’s evidence as to when exactly he was introduced to Lida Song. In the chronology handed up by Ms Winfield, it is said variously that Ming Ying was introduced to Lida Song in 1997 and in 2000. Ming Ying’s affidavit of 31 July 2008 (paragraph 7) places his introduction to Lida Song as being in 1997 (his fourth affidavit says this was in 2000). Companies

Of relevance in considering how the relevant transactions are properly to be characterized is the series of corporate entities in which Ming Ying and Lida Song were variously involved.

In June 1997, Australian International Communications Pty Ltd (AIC) was incorporated, with Lida Song as its director. (It does not seem that Ming Ying had any involvement with the company at this stage and, indeed, on one version of Ming Ying’s evidence he had not met Mr Song at that stage.) (Hua Ying later became a director and shareholder of the company in January 1999.) According to Lida Song, AIC was a family investment vehicle and earnt minimal amounts from its business activities.

In May 1999 or thereabouts Ming Ying came to Australia. (He obtained a temporary residence (s 457) visa in August 1999). Ming Ying (and his wife) stayed for a while with Hua Ying and Lida Song at their then home in Maroubra. (There was some cross-examination of Lida Song as to how the purchase price for that property was borne – Lida Song accepting that another Ying sibling (Jun Ying) had lent Hua Ying a sum of about $100,000 in connection with that purchase, a loan that Lida Song says was later repaid in full.)

On 23 June 1999 (and thus within a short time of his arrival in Australia), a company Y & S Development Pty Ltd (Y & S) was incorporated by Ming Ying. (Lida Song accepted that the ‘Y’ and ‘S’ stood for ‘Ying’ and ‘Song’ respectively but says that the company was under Mr Ying’s control.) On 26 July 1999, 4U Realty Pty Limited was incorporated. That company is said to have conducted a property development in Ashfield. Mr Song says that Mr Ying’s company Y&S provided services to 4U Realty. That project was apparently completed in or about the end of 2002. The time of completion of that project is of some relevance insofar as it is said that reliance was placed on these corporate vehicles as support for Ming Ying’s first business class permanent residence visa. In the project, as builder, was MultiCo Constructions for whom Ming Ying or his company apparently provided some services. MultiCo Constructions was also incorporated around this time.

On 11 October 1999, Ming Ying became a director of 4U Realty but with no voting rights. On 9 December 2000, Ming Ying became a director of AIC, holding 60% of the shares. (There is a dispute as to whether he had any voting rights in that company, although nothing turns on that for present purposes other than insofar as the lack of voting rights by the majority shareholder might suggest this was a transaction simply meant to establish, on paper, an investment in Australian businesses in circumstances where that was a matter which might be expected to be the subject of investigation by the Department of Immigration in connection with Mr Ying’s relevant visa application(s) but without substance, and thus would tend to support Lida Song’s contentions in relation to the overall sham nature of the corporate arrangements.)

In any event, the involvement of Ming Ying in these corporate entities was at or around the time when, it seems, he was in the throes of applying for a business resident visa. On 19 August 1999, Ming Ying was granted a 457 visa for a four-year term. (That visa has since been extended at least twice.) There is no dispute that at some time prior to late 2002, Mr Ying applied for a permanent resident’s visa under the rules applicable for those with business interests (referred to as an 854 visa). There is also no dispute that he had some difficulty obtaining (and has not obtained) such a visa although it is said that he had no difficulty obtaining a temporary resident’s visa (and hence had not reason to lie to the Department if Immigration). Mr Tam

Meanwhile, Lida Song says that in October 2000 he entered into a loan agreement with a Mr Wilson Tam (who lives in Hong Kong) to borrow the sum of HK$600,000 (the Australian dollar equivalent of which at the relevant time, Lida Song says, was in the order of $100,000). Ming Ying says that this was a personal agreement and was for the purpose of obtaining funds in order to pursue the (AIC) property development in Ashfield. A copy of the loan agreement between Mr Song and Mr Tam was in evidence. The purpose of the loan is not described in the document. Interest was payable at the rate of 10% on this loan and it was for a short term (3 months). (I note that the loan arrangements with Mr Tam have some significance in light of what construction is to be placed on some of the monetary payments which were the subject of evidence before me, although Ms Winfield dismisses Mr Tam as a ‘red herring’.) No evidence was adduced from Mr Tam but I was not invited to draw any adverse inferences as a result of that fact (and given that he lives overseas there may have been a ready explanation for the fact that he did not give evidence).

Lida Song says that on 28 August 2001, he entered into a further loan agreement with Mr Wilson Tam to borrow the sum of HK$300,000 (Lida Song’s affidavit 7 October 2008 paragraph 17). That loan was repaid in instalments in late November and early December 2001. On 29 November 2001, Mr Tam was repaid RMB 300,000 and another payment in that amount was made on 6 December 2001. As I understand it, it is accepted that those amounts discharged the August 2001 borrowing leaving on foot the larger October 2000 borrowing from Mr Tam.

Relevantly, Mr Song says that between 24 April and 1 May 2002 he and Ms Ying worked out how much Mr Tam was owed. There are handwritten calculations in Mr Song's diary to which Ms Ying was taken in cross-examination. Mr Song says these calculations show that he considered Mr Tam was owed $103,000. Ms Ying did not accept that this recorded what was owing to Mr Tam. (She was shown a copy of a cheque butt in respect of a cheque which seems to have been drawn in order to provide funds for Mr Ying to provide in turn to BSS or out of which he made the relevant payment. On it is the handwritten symbol for “Tam” for “ Tan”. Ms Ying, in her evidence, says that the word “Tam” was written on the cheque butt for the $220,000 cheque in order to remind her that Ming Ying had to pay $106,000 to buy the 25 shares (not $100,000) (T244.38-47). That does not seem to me to be the most likely explanation for such an annotation. In that regard, I accept Mr Lawson’s submission that the most logical explanation is that the word “Tan” or “Tam” was written next to the figure 106 because the money was to be used to repay a loan of $103,000 plus interest of about $3,000. BSS

Prior to the incorporation of BSS in July 2002, Mr Song had an interest (with Mr Huamin Yang) in another scaffolding supply company, called Budget Scaffold Pty Limited (BSS, it will be remembered, being called Budget Scaffold Supplies Pty Limited). Ms Winfield seemed to suggest in cross-examination of Mr Song that the reason for the incorporation of BSS was in some way an attempt to exclude two Chinese investors from involvement in that company, but there was no clear evidence as to that allegation. Mr Yang gave evidence confirming that the business of Budget Scaffold (the old company) had been taken over or was carried on now by the new company BSS and that the reason for the new company was because of a dispute with a shareholder (T 266) but there was some apparent confusion as to the various BSS entities (including another company BSS Pty Limited) and the shareholder with whom there was the dispute was not identified by Mr Yang. (In any event, it is difficult to see any relevance in that aspect of the matter even if it were true – though Ms Winfield suggests that it raises issues as to Mr Ying’s credibility, which I consider in due course).

As to the incorporation of BSS, Ming Ying says that in 2001 he and Lida Song had discussed making money from hiring scaffolding. Ming Ying then says that in mid-2002 there was a conversation with Lida Song about the formation of BSS. (The company was incorporated on 15 July 2002.) Ming Ying says that he offered to invest some funds in the company (T 63.8).

Ming Ying says that the company BSS was incorporated by Huamin Yang (who was issued 60 shares on incorporation). (Lida Song says that the company was incorporated by him. I suspect that the explanation for this is that Mr Yang’s oral evidence suggested that Mr Yang regarded the company as ‘his’ – and he was at pains to point out his signature was needed for expenditure of company funds above a particular amount - but that he may have been happy to leave the formalities of incorporation or the like to someone else such as Mr Song, particularly as he does not read English and was overseas in China a lot (at T 273, Mr Yang said that he had several companies in Australia and that basically Mr Song looked after the company and translated documents for him).) At T 288, Mr Yang said that Mr Song had prepared the finances and had sent the information to the accountant.

Relevantly, Mr Yang (who said he had been told the court case was about transferring the shares – T 92) was adamant that Mr Ying did not provide any funds for BSS to trade and that for BSS no-one else had invested in the company other than himself (ie Mr Yang) (T 297). That is consistent with Mr Song’s evidence. (Mr Yang gave evidence in the proceedings before me, called by Mr Song, though an interpreter.)

At the time of incorporation of BSS, according to the company records, Mr Timothy Fitzgerald was issued 15 shares, Mr Huamin Yang was issued 60 shares and Mr Lida Song was issued 25 shares. February 2002

Ming Ying says that in 2002, his sister introduced him to Mr Huamin Yang, a co-director and 60% shareholder of BSS. This supports Mr Song’s account that it is he, Mr Song, who has the established relationship with Mr Yang. Acquisition of shares by Ming Ying in BSS

It is not disputed that BSS was incorporated on 15 July 2002.

There are a number of inconsistencies in Ming Ying’s evidence as to the circumstances in which he came to hold shares in BSS (and to make the payment to BSS of about $106,000). According to Ming Ying’s first affidavit, and his subsequent affidavit of 31 July 2008, there was a conversation at Lida Song’s home on 15 July 2002 (the date appearing on a signed transfer of share form in respect of Lida Song’s 25 shares in favour of Ming Ying and the date which he now accepts was backdated) in which two payments to the company were discussed – a payment of $100,000 (or $106,000) that varying between the two affidavits and a payment of $154,000. In his affidavit of 31 July 2008, Ming Ying says that Lida Song told him that: You have to pay $106,000 for the shares and $154,000 is a loan to the company and you will get the money back. (Ming Ying’s affidavit 31 July 2008 paragraph 48).

(I interpose to note that that would suggest to me a distinction in the treatment between the respective sums of $106,000 and the $154,000. Further I note that the suggestion that Ming Ying would pay a sum of $106,000 (or, for that matter, $100,000 as per the earlier version of that conversation) “for” the shares (leaving aside the $154,000 said to be a loan to the company) is inconsistent with the allegation made that the sum of $106,000 was itself a loan to BSS.)

One of the inconsistencies in Ming Ying’s evidence relates to the date on which he acquired shares in BSS. In Ming Ying’s first affidavit of 12 July 2006, paragraph 10, he says that he “subscribed” for and was issued 25 shares in BSS (which Lida Song denies and which is inconsistent with the company documents which do not support the contention that Ming Ying subscribed for shares on incorporation of the company). Indeed, had that been the case there would have been no need for any share transfer as between Lida Song and Ming Ying. There therefore seems no basis to doubt that it was Lida Song who initially held the relevant shares (and did so on incorporation). Ming Ying’s later affidavit of 3 August 2009 corrected that and made it clear that he acquired his shares in late 2002. (And in the witness box, Ming Ying accepted that he had not acquired his shares on the date of incorporation of the company – T 76.29). However, his 5 November 2009 affidavit reverted to the statement that the shares were acquired on 15 July 2002 (Mr Ying conceding in the witness box that at all times since August 2009 he had been aware that the correct date was late 2002 – T 82.13 - but not accepting that all that had happened was a cut and paste from the 12 July 2006 affidavit to the 4 November 2009 affidavit –T 84.)

It seems to me that this is significant in considering which of the two versions of the conversation in relation to the share transfers is the more consistent with the evidence. If the share transfer arrangement was no more than a commercial arrangement between the two men (and not an arrangement entered into to present a particular picture of events to the Department of Immigration) then there would surely have been no need to back-date the share transfer to the date of incorporation of BSS; the form could have been dated on the date it was signed and the transfer was in fact to take place – which Ming Ying by the time of his August affidavit accepted was late 2002. On the other hand, the back-dating of the form was of potential assistance if the purpose of the transfer was to establish a constancy of shareholdings in Australia; ie that Ming Ying had held shares for some months.

There was also some inconsistency as to whether Ming Ying signed one or two forms on the relevant date in late 2002 (between his affidavit of July 2006 where he had said he had signed one form and that of August 2009, when the evidence was that he had signed two forms. Ultimately Ming Ying accepted that he had signed two transfer forms (at T 127 he confirmed that his evidence had changed in that regard) and that the forms were not signed on 15 July 2002 but later in the year.

Secondly, there is an inconsistency as to the amount that was to be paid – it was first put at $100,000 and later at $106,000. The July 2006 affidavit speaks in terms of an amount of $100,000. In the 3 August 2009 affidavit the amount is $106,000; the 5 November 2009 affidavit again differs in terms of the amount of $106,000 versus $100,000 (Mr Lawson refers also to the transcript references at T 88.42-89.24 in this regard).

Thirdly, there is an inconsistency as to the purpose for which the blank share transfer form was signed. Significantly, Ming Ying’s version of this part of the conversation differs as between various of the affidavits that he has either affirmed or sworn in these proceedings.

Relevantly, as at 12 July 2006, Mr Ying deposed to Mr Song saying to him that “for your [ie Mr Ying’s] security, he should sign a transfer form for his shares in case he did not pay the $100,000”. (Stopping there, on any view of things if the arrangement were of this nature then it would be for Mr Song’s security surely that the blank share transfer form would be held – ie so that he could redeem his shares in effect if the purchase price was not paid.)

Ming Ying later said (in his affidavit of 5 November 2009) that he was told in this conversation that for his “security” he should sign a transfer form for his shares so that, if he did not obtain permanent residency and had to return to China, then Lida Song and his wife (ie Hua Ying) would be able to look after his interest or investment in the company. (That would make sense as an arrangement for Mr Ying’s security, assuming the shares were to be his in the first place, and would also be capable of giving rise to some fiduciary obligation on the part of Mr Ying if the shares were transferred to him to hold on Mr Ying’s behalf.) Ming Ying also deposes to a conversation at this time at which he says Lida Song said that he would only do the transfer back of shares if Ming Ying did not obtain permanent residency. (While Mr Ying said in the witness box that it was all for “Mr Song’s security not his own, that could hardly be the case with the second reason attributed to Mr Song for wanting this form – T 95 – and if it were the case it would be inconsistent with the suggestion that Mr Song was only to hold the shares so transferred as a fiduciary to look after Mr Ying’s interests.)

(Mr Lawson also notes that there was no mention in the affidavit evidence attested by Ming Ying to the effect that any money had been paid at the time of transfer (and says that this was acknowledged at T 1 and T 4.3) but that in the witness box Mr Ying made the assertion that he had paid $25 cash at the time of the share transfer form being signed. Mr Lawson points out that Mr Ying's statement that he had told his solicitors of this was not supported by anything in the file note produced of the relevant instructions T 121/T 122.)

Mr Lawson submits that the suggestion that the whole conversation can be constructed by putting together the various conflicting accounts given by Mr Ying should be rejected but that, in any event, it is demonstrative of the fact that on Mr Ying’s version of events, neither of his July 2006 affidavit nor his August 2009 affidavit sets out the whole truth in relation to the conversation (see T 87.36-37).

Further, it is noted that at (T 96.5) Ming Ying said he signed the transfer form in connection with his permanent residency visa application, whereas at paragraph 65 of his 3 August 2009 affidavit he says he did not sign the share transfer in connection with his permanent residency application.

Lida Song’s version of the conversation is relevantly different. According to Lida Song, Ming Ying approached him in about September 2002 and told him that the Department of Immigration had issued a letter asking for details of Mr Ying’s current business involvement in Australia since MultiCo Constructions (on which, together with AIC and 4U Realty, Mr Ying’s earlier application had been based) had ceased business. Mr Song says Ming Ying asked if he could have Lida Song’s shares in BSS to prove the continuation of his business investment in Australia and said that any time Lida Song wanted, he could have the shares transferred back to him. Lida Song also says that Ming Ying asked to be a director of the company and for his appointment as a director to be backdated. (Needless to say, Ming Ying denies this conversation.)

Lida Song’s version of the conversation is, however, supported by Huamin Yang. Mr Yang, when asked to explain documents he had signed (and which on Mr Yang’s evidence he would not have been able to read when they were put to him without translation in the witness box) said that Ming Ying had come to talk to him and had said that the company he had registered for could not be accepted by the immigration department (T 264.15). It seemed from my observation of Mr Yang that he thought he was being asked to explain documents signed by him that were connected with Mr Ying’s immigration application (and that he had made this assumption because his understanding was that the case was all about the transferring of the shares to Mr Ying at the time).

Ms Winfield, in effect, invites me to conclude that Mr Yang is just saying what he has been told by Mr Song and that I cannot have confidence in his recollection. I do not accept that such a conclusion follows. According to Mr Yang, he regarded the immigration issue and share transfer as between Mr Song and Mr Ying as a family matter in which he wanted no involvement. That seems to me to be a not illogical attitude for him to have adopted and I see no reason why he would not have adopted a similar attitude to the giving of evidence in this case. In other words, there seems no reason for him to have coloured his evidence in favour of Lida Song and his evidence is consistent with Ming Ying having been registered as owner of the shares in order to present a favourable (but false) picture to the Department of Immigration.

Mr Yang’s evidence at T 270 was that: They said Ming Ying wants to have 10% of Mr Song’s shares and they just ask me to approve it (my emphasis)

Later he said that Mr Song had told him that the shares were going to be transferred back and he seemed to understand that the transfer was because they were relatives (T 292). He said that whatever was between them was nothing to do with the company. He said that Mr Song had told him that his brother-in-law was going to apply for a visa and he said (at T 293.18) that he had said: You are relatives and you do it by yourself. That has nothing to do with company and at T 301 I only knew they were relatives whatever they did about shares I do not care I did not have to care

Ms Winfield places reliance on this as indicating that Mr Ying, himself, had made no such request to Mr Yang (contrary to what was deposed in Mr Yang’s affidavit). I note, however, that I understood Mr Yang’s answers are consistent with the opposite conclusion. When asked to accept that Mr Ying had never asked to borrow shares, Mr Yang at T 301.22 said: No. Once he mentioned that to me I didn’t agree (my emphasis) and his next answer (if he [Mr Ying] did not say that it means that by mistake) was to my recollection not conceding a mistake but rather suggesting that there had been no mistake by him. My recollection of Mr Yang in the witness box was that he had been approached by Lida Song and Ming Ying and asked to consent to the share transfer to assist with the visa application (and that he had also had discussions about this with Lida Song). Even if he had only been approached by Lida Song, the fact that Lida Song was conveying a request in that fashion lends support to his version of events as a contemporaneous expression of his understanding of what was occurring at the time.

Lida Song says he obtained a copy of a transfer form with Lida Song’s details on it as transferor; that he applied liquid paper to make changes showing himself as the transferee (not transferor) and that he arranged for Ming Ying to sign both the forms (the first backdated to 15 July 2002 and the second undated) and that they were signed at the same time. This is consistent with Mr Poon’s recollection that there was liquid paper on the form he saw.

Ms Winfield points to the timing of the rejection of Ming Ying’s application for permanent residency (what is referred to as a s 835 visa) on 18 December 2002, as being inconsistent with there being any sham arrangement Lida Song says was entered into at some time earlier than the rejection. As I understand it, Ms Winfield’s position is that if the parties did not know before December 2002 that the permanent residency application would be rejected then why was it necessary for them to arrange the share transfer at that time. However, Lida Song’s evidence is that prior to the rejection of the visa application in December, there had been a communication from the department that suggested that there would be a difficulty with Mr Ying placing reliance on the companies with which he had previously been involved as supporting the business connection. That accords with the December correspondence from the Department of Immigration. In that context a backdating of the BSS transfers to July 2002 makes sense, as does the need to put in place company records showing a substantial investment in the company.

The relevance of the rejection of Mr Ying’s application for permanent residency is that Mr Song says that the arrangements entered into in relation to BSS were in the knowledge or with the hope that they would assist Mr Ying’s application for permanent residency, with a view to putting in place (at least on paper) sufficient evidence to persuade the Department of Immigration to grant Mr Ying a permanent resident’s visa.

Ms Winfield ‘s response seems to be that there was no reason to think that transactions of this kind would assist (and that the share transfer alone had not assisted) but that seems to disregard the factors expressed in Exhibit 8 as factors the Department would take into account on such an application and it ignores the fact that Mr Ying had an immigration agent assisting him on whose advice or with whose assistance subsequent statutory declarations were signed by each of Mr Ying and Mr Song referring to matters such as the share transfers and investments (and I would infer so doing on the basis that it was thought this would be of assistance in Mr Ying’s then application). There was no evidence from the immigration agent (Ashmore Brown) who had apparently acted for Mr Ying on his application (and who presumably could have told the court precisely what advice had been given to Mr Ying in relation to the application at relevant times).

In evidence before me was a copy of the 18 December 2002 determination by the Department of Immigration. I admitted it subject to relevance and solely as to the fact of the communication of the information contained therein to Ming Ying (thus showing he was aware of the matters raised by the department in the context of the rejection of his affidavit).

I deal later with general credibility issues. Suffice it at this point to say that it seems to me that the version of events put forward by Lida Song in relation to the late 2002 conversation in respect of share transfers is the more consistent with the timing of the events that occurred (and with the lack of any documentation supporting the alleged investment or loan arrangement). In that regard, Mr Yang’s evidence that Mr Ying did not provide any funds to the company (and the fact that, despite the alleged need for funds, the $106,000 remained untouched in a term deposit until it was withdrawn and paid to Mr Tam) also supports Mr Song’s version of events. Payments made in 2003

Ming Ying says that in January 2003 he commenced working at BSS.

On 23 January 2003, sums totalling $219,900 (comprised of three amounts - $169,000, $9,900 and $41,000) were deposited to the AIC account. (Lida Song says, but Hua Ying denies, that he had a conversation with Hua Ying at the time who said that this was for “visa purposes”).

On 28 January 2003 the sum of $220,000 was withdrawn from the AIC account and deposited into Ming Ying’s account. Ming Ying says this was a return of his “investment” in 4U Realty. However, there is nothing to show that this was the source of the funds or that he had any entitlement to funds of that amount at that time.

In evidence there was a copy of the cheque butt in relation to the $220,000 cheque made out to Ming Ying, on which there appears a handwritten annotation in Chinese characters “Tam” or “Tan”. Hua Ying accepted that this was in her writing. Ming Ying says this was a matter of an agreement between Mr Tam that was personal as between Hua Ying and Lida Song. Ms Ying was unable satisfactorily to explain why Mr Tam’s name would have been written on the cheque butt had the money not represented part or all of funds due to him.

Hua Ying said that she had written the cheque for $220,000 because Mr Song wanted to sell his shares to Ming Ying (though I do not understand how the drawing of the cheque from AIC to Ming Ying was to assist Mr Song) – T 244.40.

Ms Ying said that the reason she had written Mr Tam’s name on the cheque butt was to remind herself that Ming Ying had to pay $106,000 to buy the 25 shares “not only price” – “He just increased price” (T 244) but there was no evidence as to any negotiation in respect of the price for the shares in the first place or from what there was any increase.

Mr Song’s evidence was that he and Ms Ying had calculated what was owing to Mr Tam from the outstanding 2000 loan and his diary calculations in Chinese characters were translated for me. On the basis of those calculations, Mr Song says he believed that Mr Tam was owed $106,000 (including interest calculated for the period after the 3 month term not at 10% but at a lesser rate) and that the money paid to BSS in 2003 was that fund of money earmarked for repayment when Mr Tam asked for it (but used in the interim to create the illusion that Mr Ying had a substantial investment in the company).

Relevantly, Ming Ying, though denying that he knew Mr Tam and saying that he did not know that Lida Song had borrowed from Mr Tam (T 142) then said at 142.35/38: I only know the money was borrowed from Mr Tam at August 2002 when my sister said Lida Song borrowed money from Mr Tam and no money to repay. So she asked me to purchase shares from Song

It was thus suggested by Mr Ying in the course of his cross-examination that his sister had asked him to purchase the 25 shares in order to assist Lida Song to repay Mr Tam a loan (about which he had earlier in cross-examination denied knowing), an explanation not apparently consistent with the suggestion in Ms Ying’s cross-examination that there had been an increase in the purchase price for the shares to reflect the amount repayable to Mr Tam.

On 31 January 2003 two cheques were drawn from Ming Ying’s account, a cheque in the sum of $106,000 and a cheque in the sum of $154,000. Both were payable to BSS. The cheque for $154,000 was deposited into a term deposit (there was a dispute as to whether a certificate in relation to that deposit was given at that time to Ming Ying or later when the term deposit was closed) and later repaid to Ming Ying. The sum of $106,000 was also deposited to a term deposit, but a different term deposit account.

Together those amounts comprise the amount of $260,000 which Ming Ying says that he paid to BSS (and of which he has only been repaid $154,000).

Mr Lawson submits that the sum of $260,000 is highly significant in that, for the purposes of a permanent residency visa, it was necessary (or at least indicated in the Department’s rejection of his application in December 2002) for Ming Ying to show an investment of at least $250,000 in Australia. Mr Lawson submits that it is also relevant that there were two cheques drawn for this purpose (which would not have been necessary had the whole of the $260,000 represented a loan to BSS) – an argument Mr Song himself put forward from the witness box.

Mr Ying’s explanation for the two cheques (seemingly inconsistent with the version that Ms Winfield says I should accept, namely that there was a loan arrangement with BSS) at T 141.46 was that: $154,000 is the money that I lent to BSS and put them into the company’s account as a credit to show the company has sufficient funds. [though it is not clear who it was that Ming Ying thought had to be shown that there were sufficient funds] $106,000 is the money that I used to purchase 25 shares

Lida Song says that in May 2003 Ming Ying asked him to hold the money (the $154,000 term deposit) for a while. Ming Ying denies this but in any event on 6 June 2003 the sum of $156,029.50 from the term deposit was repaid to Ming Ying (representing it would seem the $154,000 principal plus interest).

Lida Song says that on 31 July 2003 he closed the other term deposit (ie for $106,000) and transferred those funds to his personal account in order to repay money then outstanding to Mr Tam. He says that he told Ming Ying this and that Ming Ying said this was “okay”. Ming Ying does not admit this conversation.

On 5 August 2003, Lida Song transferred the sum of $163,276.92 to Mr Tam (of which it is said some $106,000 plus interest came from the initial $106,000 term deposit). Insofar as an issue was raised as to the right of Lida Song to remove funds from BSS and apply them for his own purposes in order to repay a personal loan from Mr Tam, this is not a matter for determination in these proceedings. Wolli Creek acquisition

On 4 September 2003, Lida Song purchased a unit at Wolli Creek. The certificate of title disclosed the ownership of the property as held in the names Lida Song and Hua Ying as tenants in common in the shares 99/1. Reliance is placed on this transaction by Ms Winfield as going to credit (although it was at some stage suggested that funds from the company had been applied in payment of the deposit, it does not seem to be suggested that the deposit funds of $73,000 in any way represented moneys otherwise payable to Mr Ying, whether or not they may have been an appropriate allocation of company funds).

Mr Song admitted that he had signed Ms Ying’s name on the sale contract and mortgage documentation in July 2003. He said that he did so because she had agreed before the unit was purchased. At this time, Hua Ying was in prison in China. (Ms Ying acknowledges that she was in prison in Harbin in China during 2004 but says that she was being detained there as a witness and not as a prisoner.) I note that Ms Ying’s presence in China in prison is relevant in relation to what Lida Song was the reason for payment to BSS of part of the moneys now claimed by Ming Ying from BSS.

Mr Lawson submits that the suggestion that Ms Ying was a witness is contrary to the documents in evidence (14 1516 1718) but it is a different legal system and there is no evidence as to how (as a matter of the legal principles or court procedures there applicable) Ms Ying’s incarceration would have been characterized (save that I note it was apparently serious enough to strike fear into Ming Ying’s heart, such that the later mention of outstanding police matters was apparently regarded as being intimidatory towards him). At T 248-8/10 Ms Ying concedes that there was a request for payment of US $50,000 from the authorities in China. Mr Song says he agreed with Ming Ying that Mr Ying would contribute US$20,000 and he the balance. The former figure equates to around $30,770 as at September 2003.

Ms Winfield was scornful of the explanation that Mr Song gave “think if property don’t have Hua Ying’s name I think that these consequences will be more serious, when she come back she will be very angry “ – T 328.30, on the basis that Mr Song was exposing Ms Ying to full liability for the mortgage but only to have a 1/100 th share in the ownership of the property. Mr Song’s explanation was that he did not expect Ms Ying to pay the mortgage; that she was not working and could not do so; and I understood his attitude to be that he anticipated Ms Ying would be angry that she had no interest in the property at all had he not put her name on the title for part of the amount. (He said that he did not reflect a greater share for Ms Ying at the time as there were difficulties with her gambling – I note in that regard that there was no evidence as to this issue and its only relevance, if any, is the reaction I observed from Ms Ying in the courtroom when references to the casino and gambling were made – to which I will return later in these reasons.) Mr Song said that Ms Ying had raised no objection to the arrangement when she returned and had been very happy (T 330) and that when there had been an argument he had offered to buy out her share and she had not wanted that to happen. Again, in the absence of any other evidence as to this issue it is difficult to take this any further. Payment of $30,770 or $30,775

Ming Ying says that on 17 September 2003, he lent the sum of $30,770 (also in places referred to as $30,775) to BSS. Lida Song denies that this sum was a loan although he acknowledges that the sum was paid by Ming Ying to the company. According to Lida Song, the amount was paid as Ming Ying’s agreed US$20,000 contribution to a sum of US$50,000 required to be made to the authorities in China on behalf of Hua Ying (there was some dispute as to whether this should properly be characterised as bail moneys or as a bribe but, for present purposes, nothing turns on this). The money was paid through a company account in China. There is nothing to suggest that there were any terms of loan pursuant to which this money was provided to BSS nor any reason for BSS to make the payment in question. Financial statements of company

In relation to the loans, Ms Winfield refers to the financial statements of BSS over the period of time and, in particular, to the shareholder loan accounts. It is said that the 30 June 2004 financial statements show that Ming Ying was owed an amount of $123,443. (In the witness box, Lida Song denied that there was any loan to Ming Ying and said this must be an accounting error.) The 30 June 2005 BSS financial statements show that Ming Ying was owed $17,970. Mr Song accepts that he gave instructions for the amendment of the financial statements (he does not know why the $17,970 remains on the company records).

Lida Song’s evidence (para 35.4 of his affidavit sworn 28 September 2009) is that he had not seen the financial statements annexed to that affidavit (LS-10) prior to the proceedings. Those statements record Ming Ying as having an unsecured loan in the sum of $260,000. Mr Song said that these were for the “special purpose” (by which he referred throughout his evidence to the attempt to deceive the Department of Immigration). Events of 2005

On 2 June 2005, Lida Song signed a statutory declaration at Marrickville. A statutory declaration in almost identical form was signed by Ming Ying. It appears that those statutory declarations were prepared by a migration agent acting for Mr Ying by the name of Ashmore Brown. (I note that there was no evidence from the migration agent called by either party.)

Lida Song (who has been a Justice of the Peace since 2001) now says that the statutory declaration was false and that he knew it was false when he signed it. (I gave a s 128A certificate in relation to this evidence as it was not part of his evidence in chief and was disclosed under compulsion in cross-examination.) He says he signed the statutory declaration as a matter of family pressure in order to assist Ming Ying to obtain a permanent resident’s visa. Ms Winfield says that it cannot be suggested that by 2005 there was any real pressure on Mr Song to swear or attest to a false statutory declaration since by 2003 the marriage was in trouble (Mr Song accepting in cross-examination that they had been sleeping in separate rooms and that Ms Ying had purchased a one year ticket to China). In mid-2005, Lida Song and Hua Ying separated. Lida Song appears to accept that there were issues between the couple around the time of Hua Ying’s trip to China (which resulted in her detention in prison there) but that he was still hopeful of the marriage (and seems to have been prepared to make a substantial payment to secure Ms Ying’s release from prison not long before). If he did not consider there to be a prospect of the relationship continuing it seems hard to see why he would have put Hua Ying’s name on the title of the Wolli Creek property.

I am prepared to accept that there was family pressure on Mr Song to attest, as he did, to the events of 2002 in the document he signed in mid 2005.

This brings me to Mr Song’s explanation in the witness box as to the falsity of the statutory declaration. Throughout his evidence he euphemistically referred to the ‘special purpose’ or ‘sensitive reason’. I understood (and he confirmed) that by this he referred to the sham arrangement he says was put in place to mislead the Department of Immigration. In cross-examination he said that the 60% shareholding of Ming Ying in AIC in December 2000 was also for that special purpose (T 323) and that Ming Ying had not invested in that company. (According to Lida Song, AIC was mainly to maintain a family investment vehicle for 4U Realty and earnt minimal money from business activities. It is to be remembered that it was from AIC that the funds were derived for Mr Ying to pay the $106,000 to BSS – though there seems to be a dispute as to from where the funds in the coffers of AIC were themselves derived.)

Lida Song said he had no involvement in Y&S but that Ming Ying had earnt money through that company from cleaning and the like (T 323.5).

Lida Song says that he told Ming Ying in June 2005 that he was going to transfer the shares back to himself and that Ming Ying did not object.

There is reference in the evidence to an altercation on or about 2 July 2005 between Lida Song and his wife following which (on 10 August 2005) an apprehended violence order was obtained by Hua Ying. Ms Winfield says that it was the altercation on 2 July that led to Mr Song taking steps to retransfer the shares to himself. Mr Song accepts that he signed the form on 7 July 2005 (which Ms Winfield says is significant given its closeness in time to the altercation with Ms Ying) but later amended the date to 7 August 2005. As at that August 2005 date, Ming Ying says that BSS owed him $142,000 (relying it would seem on the financial statements) Mr Ying conceded in cross-examination that this amount included the $106,000 he says he paid (or lent) the company in relation to his acquisition of the shares.

On 2 September 2005, Lida Song applied for a divorce from Hua Ying.

Ming Ying says that in October 2005, Huamin Yang told him: You do not have any shareholding in Budget Scaffold. They have been transferred to Lida. Had Lida not informed me I could not be able to know this (I note the rather strained language in which this conversation is said to have taken place and the perhaps defensive suggestion that the information could only have been known by Huamin Yang if conveyed by Lida Song.) Ming Ying’s case

In essence, (relying on the conversations to which Ming Ying deposed at paragraphs 58, 59, 62, 64, 65, 66 and 70 of Ming Ying’s affidavit) Ming Ying says that he paid the par value for the shares in cash and that he then paid the $106,000 to BSS, so that Lida Song was not entitled to use the form to transfer the shares back to him on the basis of a non-payment of the amount – nor was he entitled to do so on the second of the conditions put forward because Ming Ying did not have to return to China.

As to the recovery of the amount of $106,000, reliance is placed on the fact that the sum of $106,000 was treated in the books of BSS as a shareholder’s loan by Ming Ying to BSS (referring to financial statements signed by Lida Song and Huamin Yang on 24 February 2004). The source of funds for the $106,000 cheque, according to Ms Winfield, came from AIC into which Mr Ying had invested funds. Ms Winfield points to a shareholder’s loan account in AIC in Ming Ying’s name (amounting to $404,000 as at 30 June 2003 and 30 June 2004) and says that Ming Ying drew against the funds he was owed by AIC in order to make the payment to BSS. (Lida Song says, on the other hand, that Ming Ying did not invest in AIC and that the AIC loan accounts were also for the a “special purpose”.)

In paragraph 17 of her submissions of 30 September 2010, Ms Winfield says “the $106,000 was removed from [BSS] in about July 2003”. It is the “removal” of these funds that is said to convert the loan arrangement into a constructive trust of some kind.

It is accepted by Ms Winfield that Ming Ying has had difficulty obtaining a s 854 permanent resident’s visa. Ms Winfield, however, says that there is no evidence that he has had difficulty obtaining a s 457 visa and that there was no need for him to lie to the Department of Immigration. Ms Winfield submits that the almost identical statutory declarations signed by Mr Ying and by Mr Song are accurate. Mr Lida Song’s defence

Lida Song’s explanation for the payment of $106,000 (made without the benefit of any certificate protecting him from self-incrimination in relation to that evidence) is that it was part of an attempt to deceive the Department of Immigration into believing that Ming Ying had greater business assets and investment in Australia than he did.

Mr Lawson submits that the BSS shares were transferred only temporarily to Mr Ying at a time when his application for permanent residency was before the Department of Immigration and that it was rejected on 18 December 2002 (as conceded by Mr Ying – T 212) in circumstances where Mr Ying was aware that if there were to be made any new application Mr Ying would need to disclose assets in Australia (T 123.19-20) and that he knew what he had to show the Department was the interests he had in Australia at the time he made the application (T123.1-4). Thus Mr Lawson says Mr Ying understood that it would assist his application if he were able to show business interests in Australia. Therefore, Mr Lawson says as at 18 December Mr Ying knew what he had to do to create the relevant impression in the Department as to his investment in Australia and the payments and loan accounts in late 2002/2003 related to this. Credibility

This is a case in which there is a clear conflict of evidence between the opposing parties and both Ms Winfield and Mr Lawson have made submissions as to a lack of credibility of the opposing witnesses. Lida Song

As to Lida Song, Ms Winfield had a veritable list of criticisms of Mr Song's evidence but they broadly boiled down to his argumentative behaviour in the witness box; his comments in relation to matters going adversely to the character of Ming Ying and Hua Ying; and matters said to go to Mr Song’s credit generally or in relation to the particular events in question.

As to those, it was certainly the case that Mr Song was argumentative during the course of his cross-examination (and queried the relevance of various questions put to him) but my impression that that was not due to a desire to avoid answering questions but rather a grievance that he had been placed in the position of having to do so (he described the fact that he was forced to sit in the witness box and answer to Ms Winfield as his ‘punishment’ for having acted as he had done). Similarly, my observation was that in general he did not rush to give evidence that might be seen to be adverse to the character in particular of his ex-wife but tended to preface his responses by raising the question whether Ms Ying would really want that evidence to be adduced – thus, while intimating that the evidence would not be to her credit, he did not seem to me to be raising gratuitous matters).

(Insofar as the written submissions suggested that the fact that Counsel was left in a position of having to make these submissions about Mr Song’s credibility was a matter that itself was adverse to his credibility, Ms Winfield withdrew any such broad submission and said it was simply the fact that Mr Song did not stop arguing that caused an adverse or that would permit an adverse finding in relation to credibility.)

Ms Winfield raised the fact that new allegations had been raised by Mr Song in his cross-examination referring to “very bad things”, broad statements as to criminal convictions and forged documents by Ming Ying. In that regard it seemed to me that both sides were quite willing to throw mud. (Moreover, the anxiety said to have been caused by reference to outstanding police matters in China might be thought to be somewhat inconsistent with the suggestion that Ms Ying was simply detained as a witness.)

Ms Winfield referred to Mr Song’s actions in respect of other shareholders in BSS as at 16 July 2002, referring to the fact that Mr Song had resigned as a director and had, she suggested, left them “swinging” in circumstances where there was a foreshadowed claim against the directors. While this may cast some doubt over Mr Song's business ethics it is difficult to see how this is relevant to his credibility as a witness in these proceedings.

Ms Winfield referred to fact that Mr Song had signed Ming Ying’s name on a mortgage document without permission. She referred to the fact that he had made Hua Ying jointly and severally liable for a mortgage but had recorded the respective interests on the title as being 99 to 1 (and that he had said she should appreciate that fact). Matters of this kind in relation to the family situation between the two seems to me to be something to be explored in another jurisdiction. Mr Song had an explanation that seemed to hint at a course of conduct between the two. I certainly cannot form a view as to the conduct in question in the absence of evidence as to what was the accepted mode of conduct between the two in matters of this kind.

Ms Winfield refers to the fact that Mr Song had refused to concede that any person had put in money to the company other than a US$100,000 amount that he says Hua Ying had borrowed from her and Ming Ying’s brother, Jun Ying. I do not know what it is suggested I should make of this. It may be that this is correct, in which case it might be thought that Mr Song should not concede something other than the facts as he perceives them.

Also raised was evidence as to an alleged conversation (which Mr Song denied) outside the courtroom on 3 July 2009 in which it is said that Mr Song told Mr Ying that he had better drop the case because his matter was in Shenyang on the police record. It is said that this was intended to intimidate Mr Ying, in circumstances where the experience of Ms Ying in prison must have been fresh to his mind. I accept that there is no evidence as to any outstanding police matters in relation to Mr Ying and a certificate to that effect was tendered at the conclusion of the hearing.

“Most tellingly” of all in relation to his credibility, according to Ms Winfield, is the fact that the first defendant (Lida Song), has remained in control of the money not Ming Ying. I fail to see how this goes to his credibility as a witness, although I appreciate that it is the focus of Mr Ying’s complaint in the present proceedings. Nevertheless, the fact that a party has retained control of funds which another party claims should have been available to that party is not a matter that of itself goes to whether the first party should be said to be believed on his or her oath.

Mr Lawson submits that Mr Song’s evidence was forthright, that he made concessions against interest and that he should be believed. On balance I accept that submission. I think that Mr Song’s evidence was consistent, was supported by the evidence of Mr Yang and is logical having regard to the timing of events in relation to the visa application. Mr Song was prepared, notwithstanding that no certificate was issued in relation to his evidence in chief, to give evidence that would not reflect well on his integrity and might expose him to criminal liability. In circumstances where the evidence against him is inconsistent, I would accept that Mr Song’s version of events is more likely to be the correct one. Ming Ying

As to Ming Ying’s credit, Mr Lawson submits that the numerous attempts by the plaintiff to adduce admissible evidence (to which I have referred in an earlier judgment prior to the hearing) point to a lack of regard to the truth and a lack of care in approaching the task of the giving evidence in this court. Mr Lawson (with only some exaggeration) characterized the plaintiff’s evidence as riddled with inconsistencies.

Mr Lawson points to the clear inconsistencies in Ming Ying’s evidence relation to a number of matters: first, the identity of the translator who had translated Exhibit A (Ming Ying asserting, at T 64.14-20, that it had been translated to him by the same translator as in the proceedings before this Court though then conceding that he had not met the translator in question until after the proceedings began (T 66.39); secondly, the date on which Ming Ying acquired his shares in BSS – which, as noted earlier, varied from the initial affidavit of 12 July 2006 in which Ming Ying said that he “subscribed to” shares on 15 July 2002; to his later affidavit evidence of 3 August 2009 that he became a shareholder in late 2002 (which in the witness box he accepted meant October, November or December 2002) – (T 77.36-38). Ming Ying conceded that he had made an error in relation to the date and that of itself might not be remarkable. However, he then re-swore to the initial allegation in his affidavit of 5 November 2009. Mr Lawson points to the fact that the opening submissions put by Ms Winfield for him were nevertheless that the shares were purchased on 15 July 2002 and that (at T 85.9-12) Mr Ying conceded that he had signed his affidavit in November knowing that the date in relation to the acquisition of shares was incorrect. Whatever the cause of the confusion in this regard, this casts great doubt on the reliability of Mr Ying’s recollection as put before this Court; thirdly (and in my view very significantly) the variations between the conversations as transposed from affidavit to affidavit in relation to matters such as the purpose for which the second transfer form was signed.

Mr Ying gave his evidence through an interpreter and said that his English was not good (but that he could follow numbers). However, there were instances during his evidence in the first part of the hearing where I observed that he had answered the question put to him before its translation and where the interpreter had noted that the witness had pointed to parts of his affidavit(s) that were in English.

At the conclusion of the defendant’s case, I gave leave for both Mr Ying and Ms Ying to be recalled in order to be examined in chief as to evidence (among other things in the case of Mr Ying) as to the steps each had taken to learn English over the period of the adjournment of the hearing after they had given evidence in chief in the plaintiff’s case. On that occasion Ming Ying answered a number of questions in what I would describe as basic English but indicated an ability to understand the questions put to him. I draw no adverse inference from the fact that Mr Ying appeared from the outset of the hearing to understand some English. There was nothing to suggest to me that his evidence was not correct insofar as he described his English as not good. Nevertheless, it meant that I cannot necessarily ascribe inconsistencies in Mr Ying’s evidence (such as the evidence as to the 2002 arrangements) to a misunderstanding of what was being put to him in a foreign language.

There was also criticism of the many and various attempts to adduce affidavit evidence from Ming Ying (some of which were referred to in one of the interlocutory judgments I gave in this matter). Again, I do not think Mr Ying can fairly be criticised for the difficulties that were occasioned in this regard. It seems to me that the fault is more likely to lie on inadvertence by those responsible for the preparation of the affidavit evidence (perhaps due to an assumption that certification of translation of the affidavit and the like was a formality that would not be subjected to the scrutiny given by Counsel for the defendant or the rulings made by me). In any event, I doubt that Mr Ying had any hand in the decision-making as to how his affidavits were to be formally sworn, translated and witnessed.

That said, it was apparent from reviewing the affidavits that much of the later affidavit evidence must have been prepared by cutting and pasting material from Mr Ying’s earlier affidavits – even material that had in the interim been corrected by other affidavits sworn by Mr Ying. Neither Mr Ying (nor for that matter his sister) accepted that this was the case but it beggars belief that a witness (whose various affidavits seem to have been translated by different people over the years) would recall in almost precisely the same words various conversations (or revert to earlier versions of conversations that in the interim had been corrected). This may diminish the reliability and hence the weight to be accorded to that evidence (on any of the various versions).

I note that in Macquarie Developments Pty Ltd and Anor v Forrester and Anor [2005] NSWSC 674 Palmer J, there considering the weight to be attributed to two affidavits dealing with critical discussions in virtually identical terms in circumstances where the evidence was that the solicitor who prepared the affidavits had “copied and pasted” portions from each, noted that: [I]t is totally destructive of the utility of evidence by affidavit if a solicitor or anyone else attempts to express a witness’ evidence in words that are not truly and literally his or her own. Save in the case of proving formal or non-contentious matters, affidavit evidence of a witness which is in the same words as affidavit evidence of another witness is highly suggestive either of collusion between the witnesses or that the person drafting the affidavit has not used the actual words of one or both of the deponents. Both possibilities seriously prejudice the value of the evidence and Counsel usually attacks the credit of such witnesses, with good reason. Where the identity of evidence is due to collusion, the devaluation of the evidence is justified but where, as in the present case, the identity of evidence is due entirely to a mistake on the part of a legal adviser, a witness’ credit and a party’s case may be unjustly damaged.

Similar caution was shown by Sperling J in Seamez v Mclaughlin [1999] NSWSC 9 when he said that: Having regard to a high degree of similarity in content, detail, terminology and sequence (particularly in relation to conversations) between the affidavits of the three witnesses, I am satisfied that the affidavits cannot have come into existence without direct or indirect collaboration.

His Honour noted that: [a]cceptance of one of the three accounts of the events … means not only that the other two are not genuinely recollected, independent accounts. It also means that the authors of those other accounts have misstated the way in which their respective accounts came into existence, and seriously so. The credit of the others would then be worthless.

Those cases were considering the position where the cut and paste versions were as between different witnesses evidence. More close to the present case, in Dialog Pty Ltd v Addease Pty Ltd [2003] FCA 1359, Cooper J did not accept as the witness’ independent recollection evidence produced by way of a “cut and paste” exercise.

The way in which Ming Ying’s affidavit evidence seems to have been prepared (and the fact that as at 5 November 2009 he appears to have deposed to a version of events which by then he had already appreciated was incorrect) must give rise to doubts as to whether any particular version of the affidavit evidence represents a reliable recollection of events uninfluenced by what he had said earlier or what had been contained in earlier affidavits.

Apart from the fact that this reduces the confidence I might otherwise be able to place in the affidavits recounting Mr Ying’s own recollection of events – as opposed to my impression that they reflect to a large extent a cut and paste exercise by one of his lawyers, the inconsistencies across different affidavits sworn by Mr Ying (which may well have been a function of the cutting and pasting of earlier affidavits) nevertheless leads me to view the affidavit evidence of Mr Ying with some caution. On Mr Ying’s own oral evidence, not all of his affidavit evidence was correct and nor was it necessarily complete in any particular affidavit. This casts doubt on the general reliability of Mr Ying’s recollection.

A further matter to note is that Mr Ying was quick to put forward the explanation of events that suited his case, and laboured that explanation, even when it was not responsive to the question, thus giving the appearance of arguing what he believed to be his case. I place little weight on this since it seems to me that Mr Song too exhibited a tendency to argue his own case (and was perhaps more confrontational in so doing – though that may be because Ms Winfield engaged to some extent in argument with him).

I considered Mr Ying to exhibit genuine feeling in his complaint that he was left with nothing (no shares and no money). However, that does not (as Mr Ying considered it should do) convert any claim he might have had in contract (ie if he considers that he did not obtain what he had bargained for) to a claim for a constructive trust, nor does it assist him to overcome the difficulty occasioned by the overall inconsistency and unreliability of his evidence.

At the conclusion of the trial I was left with no degree of confidence as to veracity of the version of events asserted by Mr Ying. I did not consider his evidence to be reliable and where there was a conflict between his version of events and that of Mr Song, in general I considered Mr Song’s evidence to be the more credible. That, of itself, means that I cannot be satisfied that Ming Ying has established a claim for relief. Hua Ying

As to Hua Ying, Mr Lawson submits that the evidence in her affidavit of 3 August 2009 as to the transfer of monetary sums was designed to make it look as though Ming Ying had sufficient money to lend Lida Song the sum in question. Mr Lawson pointed to the evidence given by Ms Ying in her affidavit which suggested (as Ms Ying seemed to accept it did) that Ms Ying was present physically in Hong Kong when various banking transactions had occurred and that she had witnessed what had happened. (So, for example, her affidavit refers to occasions when moneys were debited from a Hong Kong account and credited to an account in the name of Lida Song and Ms Ying said she was present on those occasions. Ms Ying said that those funds came to be in the Hong Kong bank account because she had brought this money in cash to Hong Kong and deposited it there – T 167.23. She expressed the opinion that some of the transfers between Hong Kong bank accounts might have been because she was in Hong Kong at the time – T 169.1.)

In cross-examination, Ms Ying was unsure whether, having said in her affidavit that she was present when money was withdrawn from a Hong Kong bank account on certain occasions, she was actually present (“It could be that I was present, it could be that I wasn’t present” – and seemed to link that to the fact that she was speaking Mandarin at the time – T 173.8; and thought there was not much difference – T 175.15). In relation, for example, to a transaction that had occurred on 15 January 1977, Ms Ying accepted that she had sworn an affidavit saying that she was present in Hong Kong (T 176.44), she questioned whether it would be counted that she was present in Hong Kong if she had talked to her husband on the phone when he was there almost every day (T 176.36); she conceded that she understood her affidavit as meaning that she was present in Hong Kong at the time (T 177.31; 177.50) and then said that she did not now know whether she was physically present in Hong Kong at the relevant time( T178.4). She ultimately seemed to concede that she had not been present in Hong Kong when various of the transactions took place – T 180.15 (as must implicitly be conceded by profferring the explanation that she was in Australia but talking on the phone to Lida Song in Hong Kong), although even that concession was not clear – since she also later raised the possibility that she had been there but that there would have been no need for her entry into Hong Kong to be stamped in her passport or that she had a third passport (not in evidence) that might have been used.

Ms Ying cannot have been sure that she was physically present in Hong Kong at the times her affidavit suggested insofar as she proffered more than once the explanation that she considered that she was present in Hong Kong at the time because she had made telephone calls to Lida Song who was her then husband at the time (“Back then [ie, when she swore her affidavit], I believed the fact that I called him [Lida Song] and talked to him on the phone should be counted as I was present in Hong Kong” - T179.1-5 and similarly at T 179.10-14, where she also said that this was for money transferring and that was different from doing business, at T 180.10, T 180.33 T 181.35.). When asked about a paragraph in her affidavit in which she swore that an amount of money was money “which I had taken to Hon Kong”, Ms Ying said “The money is not necessarily taken by me in 1997. It’s also possible that I asked Lida Song to deposit the money in Hong Kong” – T 181.48 – a completely inconsistent explanation unless it is suggested that “I had taken” meant “my husband had taken at my request”).

The affidavit evidence to which Ms Ying was taken (from her affidavit of August 2008) was repeated in her affidavit as resworn on 1 July 2009 and Ms Ying’s response when taken to tat was that she still believed that as long as her husband was in Hong Kong she “should be taken as being in Hong Kong as well” – T 183.48 (see also her answers at T 184.8;.21;.43..48)

At T 188.41, after an adjournment in which Ms Ying reviewed her passport, she said: After I check the passport I realized that when I gave the affidavit I did not know I wasn’t physically present in Hong Kong because the passport was not with me. However, no matter whether I was physically present in Hong Kong, it wouldn’t matter because it is only for money transfer.

Pausing there, it is of course quite feasible for a money transfer to take place without being present at the bank from which the money is transferred. The difficulty is that Ms Ying’s affidavit evidence seemed to emphasise her presence in Hong Kong when various transactions took place, Ms Ying understood her affidavit as conveying that meeting, and (whether or not she had the passport with her when she prepared her affidavit) she must have known at the time whether or not she was in Hong Kong when these events happened (or if she was unsure she could not have deposed truthfully to an assertion that she was there). Evidence was then given by Ms Ying that although she had deposed to taking money to Hong Kong on a particular date in 1998 she could not have done. Ms Ying first said that she had taken the money to Hong Kong, then that the date in her affidavit was wrong. She was taken to an occasion in February 1999 when she had similarly deposed to the transfer of moneys and repeated her belief that as it was only a money transfer and she called Lida Song in Hong Kong then she was present in Hong Kong (T 191.5-16) before accepting that she really did not know whether she was physically present in Hong Kong.

When Ms Ying’s evidence resumed a week later, Ms Ying gave the further explanation that she had been advised on an earlier occasion (when working for a Japanese company and authorizing transfer of moneys over the phone from the bank) that giving authority over the telephone meant that she was personally present in the bank (T 236.45ff). Ms Ying also went on to explain that she had prepared her affidavit based on the receipts and to express anger that she had not been provided with her passport in this regard.

The contradictory nature of Ms Ying’s evidence on this issue casts real doubt as to her reliability as a witness. I can have no confidence (as she herself had no confidence) that Hua Ying was present and physically witnessed the money transfers to which she deposed in her affidavit (as opposed to talking about them over the telephone at some stage). I accept that some of the confusion in her evidence may have been due to difficulties with language and the translation of affidavits. However, the inconsistencies between her affidavits cannot so be explained if (as she said) they had been translated to her and they were her own recollection of events. (Furthermore, by way of example, the suggestion that two affidavits each attesting to a different date of incorporation of AIC were both correct (T 203.36) because Mr Song had kept the evidence and she did not have anything with her is nonsensical. It might provide an explanation as to why the date was incorrectly ascribed but both dates cannot be correct.)

Ms Ying’s reliability as a witness was in my view substantially affected by the rather extraordinary way in which her evidence as to monetary transactions said to have been undertaken in her presence or by her on behalf of her brother unfolded.

Ms Ying was also taken to inconsistencies in the witness statements apparently in evidence given or filed in the Family Court proceedings as to her financial position (Exhibit 4). Those statements (9 November 2007 and 19 November 2007) give inconsistent evidence as to whether Ms Ying owned a property in Shenyang in China. Mr Lawson submitted that Ms Ying had demonstrated an ability to place false evidence before the Family Court and that I should conclude that she has done so here. Ms Ying, for her part, explained this by saying that after swearing her first affidavit she had had doubts and had rung someone in China to check the position (and then amended her affidavit to reflect the position that she was then told about the ownership in China). It seems to me that I cannot draw any adverse inference in light of that explanation (moreover it seems ironic for it to be suggested that I should draw an adverse inference from the fact that Ms Ying may have placed false evidence before the Family Court when I am told that Mr Song was willing to attest on oath to false evidence himself. The only difference seems to be that Mr Song has now been prepared to acknowledge the fact.)

(I should add in this regard, for completeness, that objection was taken by Ms Winfield to the cross-examination by reference to the Family Court affidavits on the basis that this would contravene the non-disclosure provision (s 121) of the Family Law Act 1975 (Cth). I formed the view that such an objection was not well founded and drew Counsels’ attention to Re Edelsten; Ex parte Donnelly (1988) 18 FCR 434; (1988) 80 ALR 704; (1988) 12 Fam LR 294, following which the objection was withdrawn. Lest there be any doubt, I note that I am of the view that there was nothing improper in the cross-examination in that regard.)

Insofar as Mr Lawson referred, in the context of Ms Ying’s credibility as a witness, to an answer given by Ms Ying at T237.14-16 (“That's right I am not”) when asked if she was making up answers without any regard to the truth, I doubt whether Ms Ying understood this import of that question and answer.

As to Ms Ying, she was quiet in her manner and, notwithstanding that my observation of her in court was that she appeared to follow what was being put to Mr Song and his responses without the benefit of translation, when she too was called to give further evidence as to her ability to speak English it was impossible to proceed because (perhaps ironically) she was unable to comprehend the meaning of the oath to tell the truth. Therefore I would accept that she was not able to speak or understand more than basic English. Again that does not lead me to draw any adverse inference but it does leave up in the air how much allowance should be made, when considering her evidence generally, for the possibility that she did not understand what was being put to her during the course of translation. My observation, however, was that Ms Ying was confident in conversing with the translator during the course of questioning if she did not understand the questions.

The most difficult part to accept of Ms Ying’s evidence, unfortunately for the plaintiff, was that on which reliance was placed to establish that her brother had substantial funds which were made available to BSS by way of loan. That is because her affidavit evidence suggested (on the reading that Ms Ying accepted it was intended to convey) that she had been physically present in Hong Kong and had witnessed the transfer or deposit of moneys in or from Mr Ying’s accounts. Ms Ying was forced to concede (when shown her passport for the relevant period)

Having regard to the authorities as to the circumstances when it is incumbent upon a trial judge, as a matter of procedural fairness, to give notice to the parties of an intention to rely upon particular observations of a witness (and in particular the reasons of Mason P in Kassem v Crossley & Anor ; Kassem v Krayem & Anor [2000] NSWCA 276; Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353, at [2] and King CJ in Angaston & District Hospital v Thamm (1987) 47 SASR 177, at 178-179,) I raised with Counsel during the hearing my observation that Ms Ying (who had been quite adamant during cross-examination as to her inability to understand English even if it was translated to her) seemed to be reacting in the courtroom to evidence given by Mr Song in English (without the benefit of any apparent translation of that evidence). (There had also been more than one occasion when she had answered a question or corrected the translator before any translation in English had been made to her.)

The circumstances in which, as a matter of fairness, a judge should give notice that he or she intends to rely upon an observation of the witness in the witness box are the exception rather than the rule ( Chaina v Alvaro , at [2]).

In Kassem , it fell to the Court of Appeal to consider the issue as to whether there had been a denial of natural justice or procedural fairness in circumstances where the trial judge had not indicated an intention to have regard to anything observed about the appellant’s behaviour in the courtroom after the time that he had left the witness box. Mason P in Kassem , delivering the judgment of the Court of Appeal, referred to (at [15]) what was said by King CJ in Angaston , at 178-179, where his Honour (having referred to this as being a matter of fair play and commonsense) had noted that “the condition upon which a judge is at liberty to take notice of what he has seen for himself, is that the parties should know or be informed of what he has noticed, and have an opportunity of answering or dealing with it”, King CJ said: The rule, as it appears from the passage cited, is not to be regarded as absolute in the sense that it must be applied rigidly to every observation which a judge might make of a party during the course of the trial outside the witness box. Something will depend no doubt on the circumstances of the particular case and upon the significance of the particular observations. It is clear however that where the judge makes observations of the actions or demeanour of a party, which actions and demeanour are not observable by counsel, and makes use of those observations in a way which has a significant influence upon his decision of the case, he is required in justice before making use of those submissions to make those observations and the possibility of his using them in the course of his judgment known to counsel at a stage of the hearing at which counsel still has an opportunity of dealing with them in a proper and effective way . (my emphasis)

Mason P also referred (at [16]) to what had been said in Government Insurance Office of New South Wales v Bailey (1992) 27 NSWLR 304 by Kirby P, as his Honour then was, at [313]; So long as the conventional theory reigns that observations of a party or other witness are an important and legitimate element in curial decision making, it is appropriate to permit at least the observations to be taken into account which occur inside the courtroom. However, this conclusion leads to the question of notification to the parties and their representatives where the observations have occurred, as here, outside the actual period of the trial and when the person being observed is at the back of the court behind the representatives of the parties who thus have no opportunity to observe the features in question and by interrogation, evidence or advocacy, to persuade the decision maker to a different view about them than has been formed.

His Honour also referred (at [26]) to the need for there to be an opportunity to meet issues so raised and noted the principle, as stated by Gaudron J in Re Association of Architects of Australia; Ex parte Municipal Officers Association of Australia (1989) 63 ALJR 298, at 305, that; As was pointed out by Deane J in Sullivan v Department of Transport (1978) 20 ALR 323 at 343, procedural fairness requires only that a party be given “a reasonable opportunity to present his case” and not that the tribunal ensure “that a party takes the best advantage of the opportunity to which he is entitled”. And it is always relevant to enquire whether the party or his legal representative should reasonably have apprehended that the issue was or might become a live issue.

In Chaina v Alvaro , Giles JA noted (at [2]) that there was no dogmatic rule in relation to the use in decision making by a judge of observations of a witness outside the witness box, Gyles JA said (at [3]); Exceptionally, but as a matter of principle possibly, it may be that fairness requires the judge to draw attention to an observation of the witness in the witness box. The rule is not restricted to the actions or demeanour of a party, and is not necessarily restricted to when the actions or demeanour are not observable by counsel, since vice lies in the judge making use of what has been observed when the party’s representatives are not aware that it may be used in the decision making. In Ucar v Nylex Industrial Products Pty Ltd [2007] VSCA 181; (2007) 17 VR 49, Redlich JA began by noting at [42] the parties’ entitlement to know the case sought to be made against them and have the opportunity of replying to it, and after consideration of the cases said: 52. A decision-maker sitting in the courtroom is not blind to the events which occur in the courtroom but when his or her observations are of matters which the party’s representative have no opportunity to observe, or where it may be reasonably assumed that the party’s representatives will not appreciate the inferences which the decision-maker intends to draw from observations that are made, the party should be informed of the observations or the inferences which the decision-maker contemplates drawing so as to afford the party an opportunity to deal with such matters, whether by calling evidence or by making submissions. (Citations omitted) Many considerations may come into whether there has been a denial of procedural fairness, as it is a question of practical fairness and justice. Amongst other things, where a party is represented the focus will ordinarily be on what should in fairness and justice be made known to the representative. It is not required that the representative be appraised of the judge’s views generally, although if the judge is minded to decide the case on a completely different basis from that on which the case is being conducted, that should be raised, Selpsam Pty Ltd v Gahlev (2005) NSWCA 208; (2005) 3 DDCR 1 at [78] per Ipp JA.

In Adamson v Ede [2009] NSWCA 379, the question was raised as to whether a judge contemplating making a finding detrimental to a party was obliged, as a matter of procedural fairness, to warn that party that he was contemplating making such a finding and to give the party a proper opportunity to be heard about whether the findings should be made. In that case Campbell JA said (at [72]) he did not regard Holt v Protective Commissioner (1993) 31 NSWLR 227 as standing for any general proposition that a judge should inform someone concerning whom he is contemplating making an unfavourable finding and give them a specific opportunity to argue against that finding being made, and noted that there was authority against a judge being under an obligation to warn parties that he may make findings detrimental to them, referring to what was said by Lord Diplock in Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, at 369: Even in judicial proceedings in a court of law, once a fair hearing has been given to the rival cases presented by the parties, the rules of natural justice do not require the decision-maker to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he reaches a final decision. If this were a rule of natural justice, only the most talkative of judges would satisfy it and trial by jury would have to be abolished.

Similarly in SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152, at 166 [48], the High Court said; Procedural fairness does not require the Tribunal to give an applicant a running commentary upon what it thinks about the evidence that is given. On the contrary, to adopt such a course would be likely to run a serious risk of conveying an impression of pre-judgment.

In Piras v Egan [2008] NSWCA 59, Giles JA (at [3]) in considering a question of procedural fairness, indicated that it is not necessary that the trial judge disclose before judgment what the judge saw in the evidence what was described as a clue as to what might have been going on any more than it was necessary that the judge disclose before judgment the significance seen in other of the host of competing factual indicators.

While I had not formed a view as to whether what I had observed was cause for any adverse inference to be drawn (and I do not now draw any adverse inference on that basis) I considered it appropriate for the record to note my observations (and to confirm that I had observed what Mr Lawson had also observed in that regard). At the conclusion of the hearing, I gave leave for further evidence to be adduced by both Ming Ying and Hua Ying as to their ability to speak English. Ms Ying (perhaps ironically) was unable to understand sufficient English to permit the oath or affirmation to be administered (being unable to confirm that she understood what was meant by the truth). I draw no adverse inference from the reactions of Ms Ying in the courtroom. I accept that her ability to speak English is limited (as did, indeed, Mr Song). Nevertheless, she was to my observation capable of following some basic English and there were occasions during her cross-examination when she answered before the question had been translated for her.

The most troubling part of Ms Ying’s evidence, it seemed to me, was that relating to the deposits said to have been made in Hong Kong. It seems to me that this was unreliable and casts doubt on the reliability of the balance of her evidence. Where her evidence differed from that of Mr Song I consider that his evidence should be preferred. Issues (i) Does Lida Song hold 25 BSS shares on constructive trust for Ming Ying?

The basis on which it is contended that Lida Song holds the shares on constructive trust for Ming Ying is one that was not clearly articulated (if at all) until the close of the hearing and therefore there is a very real question as to whether it is permissible for Ming Ying now to raise such a claim.

That said, the claim as finally sought to be put is that Lida Song failed to honour or observe a condition to which it is said the right to re-transfer the shares into his name was subject. That is premised on there having been, in the first place, an acceptance by Ming Ying that Lida Song might be able lawfully to re-transfer the shares.

On the basis of the analysis set out above, I am unable to find that there was an agreement on the part of Lida Song to do more than to permit Ming Ying to hold the title to the shares on a temporary basis, for the purposes of assisting his then visa application(s). I consider that it was a term of the arrangement pursuant to which Lida Song transferred his BSS shares to Ming Ying that Lida Song could effect a transfer back at any time, subject only to the possible condition that he would not do so while the visa application(s) were on foot or under consideration. At most, therefore, it seems to me that the transfer back of the shares in 2005 might be said to have been a breach of that condition. That, however, would seem to sound only in a claim for breach of a contract or that Lida Song is estopped from denying an obligation not to do so in those circumstances again sounding in a claim for breach of contract.

How is the (unpleaded) claim in trust sought to be sustained? In essence, it is said that there is a Quistclose trust arising because of a failure on the part of Lida Song to use the share transfer form for the specific purpose for which it was given. I do not accept the underlying factual premise – in other words, I do not accept that Lida Song was precluded from using the share transfer form otherwise than if Ming Ying was compelled to return to China by reason of a rejection of his business class visa application. However, even assuming that had been established, I do not think it gives rise to a trust as claimed.

Ms Winfield relies upon the line of authority deriving from Black v Freedman. The trust imposed in such a case seems to be more correctly characterized as a resulting trust than a constructive trust.

In Robb Evans v European Bank, Spigelman CJ (with whom Santow and Handley JJA agreed) stated (from [112]): The trust so created is, in my opinion, better described as a presumed or resulting trust, rather than as a constructive trust. There is no authoritative statement as to when trusts should be classified as presumed, resulting or constructive. (See, for example, R P Meagher and W M C Gummow, Jacobs' Law of Trusts in Australia, 6th ed (1997) Sydney, Butterworths, especially at par [303]; H A J Ford, W A Lee and P McDermott, Principles of the Law of Trusts, (1995) Sydney, LBC Information Services, at [1120]; R Chambers, Resulting Trusts (1997) Oxford, OUP, especially at 44–47; M Cope, Constructive Trusts (1992) Sydney, Law Book Company Ltd, at 5–8; Westdeutsche Bank (at 707–709); P H Pettit, Equity and the Law of Trusts, 9th ed (2001) London, mButterworths, at 62–67, ch 9; A J Oakley, ed, Parker & Mellows: The Modern Law of Trusts, 8th ed (2003) London, Sweet & Maxwell, at 38 and 39, 42–45; Allen v Snyder [1977] 2 NSWLR 685 at 698; Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2003] 2 Qd R 661 at 678 [31]–[37]; P J Millett, “Restitution and Constructive Trusts” (1998) 114 Law Quarterly Review 394 at 400–402; M Stone and A McKeough, “Tracing in the Age of Restitution” (2003) 26 University of New South Wales Law Journal 377, at 385–386.) A case of simple theft involves a transfer of property about which the transferor was entirely unaware. The transferee holds any property into which the stolen property has been converted on trust in a manner which should be seen as automatic. (See Chambers, Resulting Trusts, especially at 22–23, 116–118.) The Australian authorities indicate that a trust arises immediately upon the acquisition of the property, not when recognised by a court. (As in Black v S Freedman & Co, see also Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407; [1970] 1 NSWR 650.) As Millett J (as his Lordship was) said in a case involving fraudulent misappropriation: “the trust which is operating in these cases is not some new model remedial constructive trust, but an old-fashioned institutional resulting trust” (El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 at 734; see also P J Millett, “Tracing the Proceeds of Fraud” (1991) 107 Law Quarterly Review 71, at 81). If appropriately characterised as “constructive”, the trust that arises upon receipt of stolen funds by an active participant in the theft is of an institutional rather than remedial character. (The terminological difficulties which plague this area of the law are discussed in P J Millett, “Restitution and Constructive Trusts”, at 399–400, 402.) In my opinion, a constructive trust that arises in this way — or, as I would prefer to describe it, a presumed or resulting trust — should be equated with an express trust for purposes of the duty to get in the trust estate. In both cases, this duty is necessary to ensure that the objectives of the trust are achieved by what will often be the most efficacious means, that is, proceedings by the trustee rather than the beneficiaries. In any event, the duty is fundamental to the performance of all other duties and does not vary in strength from one class of trust to another.

As to the circumstances in which a trust will arise or be imposed beyond the misappropriation situation considered in Black v Freedman , in Australian Broadcasting Corporation v Lenah Game Meat , the High Court (considering whether an interlocutory injunction should have been granted to restrain the distribution, publication, copying or broadcast of a video which had been hidden in an abattoir by unidentified trespassers) held, by majority, that it should not have been granted. In the context of consideration as to whether a cause of action for unjustified invasion of privacy could be maintained, it was said (per Callinan J, at [297]) that the film was brought into existence and acquired in circumstances in which the appellant could not in good conscience use it without the permission of the respondent.

Callinan J (who dissented in the result) went on to state (at [298]-[299]); There is no case in this court which compels me to reach a different conclusion as to unconscionability from the one that I have reached. It is a conclusion that should ensure that in any future such cases an item of valuable property obtained in violation of a person's proprietary right to exclusive possession in circumstances in which the defendant knows or ought to know of the violation, is to be regarded as unconscionably obtained and to be delivered up on demand to the person whose rights have been violated. The conclusion does not depend upon the fact that the violation was a quasi-criminal offence (and, incidentally, probably also the more serious offence of breaking and entering). Nor does it depend upon the fact that the appellant gave no value at all for the film or that it might have very considerable value in its hands. These three factors are simply ones that serve to highlight the injustice of any denial of relief to the respondent. The conduct of the appellant here is certainly no less serious and unconscionable than the conduct of the trustee in Keech v Sandford. The harm that might be caused to the respondent by the exploitation of the tape is plainly greater than any loss to the beneficiary on the renewal of the lease in Keech v Sandford in circumstances in which the lessor declined, and could not be compelled to renew the lease for the benefit of the beneficiary. Indeed, on one view it could be said that once the lessor refused to renew the lease for the benefit of the beneficiary, the trustee had no relevant relationship with the beneficiary with respect to any further lease of the premises. And the use of valuable property that could not have been obtained but for the violation of a most important proprietary right is little different from the receipt of stolen money. (footnotes omitted)

It is consistent, therefore, with what O’Connor J had said in Black v Freedman (at 521): where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person's hands. If, of course, that other person shows that it has come to him by bona fide for valuable consideration, and without notice, it then they lose its character as trust money and cannot be recovered. But if it is handed over merely as a gift, it does not matter whether there is notice or not.

The principle that property obtained in violation of a person's proprietary right to exclusive possession in circumstances in which one ought to know about the violation is to be regarded as unconscionably obtained is somewhat different from the present situation. Here, any suggestion of fraudulent misappropriation is expressly disavowed. What is said to give rise to a trust on this basis is failure to abide by a condition to which provision of the share transfer form was made subject or use of the form for a purpose other than that specified.

As to the suggestion that there was “property” in a blank transfer form capable of constituting property of a trust (irrespective of whether that trust is characterised as an express, resulting or Quistclose trust or otherwise) the only property would seem to be that comprised in the actual piece of paper (although the retention of an unexecuted and unregistered share transfer form would not otherwise provide a basis for arguing the existence of a trust over shares in relation to which the transfer form could have been used).

Absent the requisite intention sufficient to base a finding that, once shares were acquired (whether that by way of the transfer form or otherwise), those shares were then held on trust, the mere retention of a share transfer form does not of itself form a basis to find that there is a trust over the shares themselves, for the following reasons: (i) any such trust said to arise would fail for lack of certainty of subject, that is it would not be certain as to which or how many shares were the subject of the alleged trust ( Federal Commissioner v Clarke – discussed below); and (ii) at the time the transfer form is unregistered and thus no transfer is effected, there is no property in the hands of the trustee capable of constituting the trust (other than the piece of paper itself) as the shares have not yet been transferred.

It is trite to note that a trust must be associated with property and rights of property ( Public Curator of Queensland v The Union Trustee Company of Australia (1922) 31 CLR 66) that is there must be a subject of the trust. It was there stated by Higgins J (at 75): A trust must be associated with property, and rights to property. As Story said ( Contracts , vol. i. , sec. 296), "trusts are, therefore, equitable interests in property, based on confidence, over which Courts of equity alone have full jurisdiction."

Further, the property constituting the trust, that is the subject, must be sufficiently clear or certain – that is it must be clear what the property is that constitutes the trust ( Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246).

As noted by the learned authors of On Equity (Young, Smith and Croft, LawBook Co, 2009, at [6.180]) the “three certainties” are as described in Knight v Knight (1840) 3 Beav 148, at 172-173; (1840) 49 ER 58, at 68, where Lord Langdale MR stated: As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommended, or entreated, or wished, to dispose of that property in favour of another, the recommendation, entreaty, or wish shall be held to create a trust. First, if the words are so used, that upon the whole they ought to be construed as imperative; Secondly, if the subject of the recommendation or wish be certain; and Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain. or, as described in Wright v Atkyns (1823) Turn & R, at 157; (1823) ER 1051, at 1056: In order to determine whether the trust is a trust this Court will interfere with, it is matter of observation, First, that the words must be imperative, that the words are imperative in this case there can be no doubt; Secondly, that the subject must be certain, and that brings me to the question what is meant by the words “the property”; and Thirdly, that the object must be as certain as the subject, and then the question will be, whether the words “my family” have as much of the quality of certainty, as this species of trust requires.

Relevantly, the decision in Federal Commissioner of Taxation v Clarke in the course of finding that an intention to transfer shares to each child, without specifying which or how many shares did not have the requisite degree of certainty of subject, indicated that a blank share transfer form could not be analogous to a negotiable instrument, stating: The position is, substantially, that the taxpayer kept a number of certificates in Badak and in Bux in his office safe, most of them in the name of the legal manager, Murchie, in trust, but having a blank transfer endorsed. They had been put into the safe from time to time by Clarke, but there was no earmarking of the certificates as for Orton or for Scarborough, or for Clarke himself or for any of the family. The safe, as the Judge states, contained scrip which the appellant held on behalf of himself, one Orton and one Scarborough, most if not all of it in the name of Murchie the secretary of the company. This practice of having shares in the name of the manager is due to the Victorian provision as to mining companies (see Companies Act 1915, sec. 304). Under sec. 319 of that Act, no share shall be deemed to be transferred unless and until the name of the transferee is entered as such transferee in the register (and see sec. 29). Each share must be numbered and identifiable by its number or otherwise (secs. 325, 320). It is clear that the taxpayer had power to transfer the legal title to any specific share—from his own name, if it was in his own name, from Murchie, if Murchie held for him; and this transfer was not made. Mann J. says: "All scrip remained in his hands with blank endorsements and could therefore be treated as bearer securities." I confess that I do not understand this statement of law, as to transfers of shares, in the face of sec. 319 of the Companies Act 1915 and of Tayler v. Great Indian Peninsula Railway Co. (and see Lindley on Companies , 6th ed., vol. i. , p. 655). Shares cannot be treated as negotiable securities in this way. But the judgment proceeds:—"Directly sales began to be made and the scrip to be used indiscriminately the register ceased to have any relation to the real interests of the persons concerned. It therefore became necessary for the" taxpayer "to make up his mind from time to time on whose behalf he was selling, whether on behalf of his family or himself or Orton or Scarborough. This he determined and noted for his own guidance and for the information of Orton and Scarborough merely by making memoranda on the brokers' sold notes as they came into his hands." I thoroughly accept this clear statement; but it shows that the taxpayer determined the destiny of the proceeds not at the alleged giving of the shares but when the shares had been sold. The sales occurred from time to time, and at different prices; and each specific shareowner should be in a position to say "that is my share, I want the proceeds" (not the proceeds of the shares of others). So there was no gift of shares, as recognized by law, whatever the benevolent intentions of the taxpayer towards his family may have been.

Even apart from the above issue, a difficulty for Ms Winfield’s argument is that there is an absence of any explicit judicial statement (at least that I have found and none was cited by Ms Winfield) that the subject of a Quistclose trust can form something other than money (or at least its equivalent value ie a cheque or bank account, as was the case in Quistclose itself). The one explicit reference that I have found to this requirement or restriction in the application of the principle is in Robert Chambers’ paper, ‘Restriction of the use of money’, in Swaddling W., (ed) The Quistclose Trust: Critical Essays, Hart Publishing, 2004, at 77. There, Chambers states: The essential feature of every Quistclose trust is that money is paid by one person to another with a condition attached to its use. The money may be cash or any form of equivalent value, such as a cheque or bank account. A condition restricting the use of other assets, such as land, goods or intellectual property, will not produce a Quistclose trust; nor will a condition that does not restrict B’s use of money received, but merely requires B to pay an equivalent sum of money to someone or for some purpose.

The statements of principle extracted below are clearly expressed in relation to the payment and retention on trust of a sum of money. (Having said that, in Barclays v Quistclose, the money paid over had been deposited into a bank account so that, strictly speaking, the subject of the trust was an obligation on the part of the bank to honour the account, being a chose in action, although this would seem only to go so far as to allow one to say that the principles apply beyond cash and can apply where some monetary equivalent such as a cheque or bank account, and as acknowledged by Chambers in the extract above.)

Where money has been paid over for a specific purpose, so that there can be said that there is a trust for that purpose then in circumstances where that purpose has not been fulfilled, that is those funds have not been applied to that purpose then a trust may be impressed upon those funds that have not been so applied in favour of the payer ( Barclays Bank v Quistclose ).

The principle is described as follows in Jacob’s Law of Trusts (at [1206]); It has now been long established that if a person lends money to another on terms that it will be applied towards a specified purpose, and it becomes impossible so to apply the money, it will be held by the latter on an express or a resulting trust for the former. Thus in Barclays Bank Ltd v Quistclose Investments Ltd the House of Lords held that money advanced by a creditor to a company for the purposes of enabling the latter to pay a dividend was held on trust for the creditor when the liquidation of the company frustrated any possibility of paying a dividend.

In Quistclose , it was stated by Lord Wilberforce (at 580-582) (with whom Lord Reid, Lord Morris, Lord Guest, and Lord Pearce agreed); There is surely no difficulty in recognising the co-existence in one transaction of legal and equitable rights and remedies: when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose (see Re Rogers where both Lindley and Kay LJJ explicitly recognised this): when the purpose has been carried out (ie, the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (ie, repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law and equity cannot let in these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not. In the present case the intention to create a secondary trust for the benefit of the lenders, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it.

A necessary consequence of the mutual intention of the parties that a primary trust in favour of those entitled to be paid the fund (in Quistclose, this was the shareholders to whom a dividend was owed) and if the object of the primary trust fails a secondary trust will arise where by that fund formerly the subject of the primary trust will become the subject of a secondary trust, which, according to its terms, is held for the benefit of the original payer. By reason of the fact that the money is always the subject of a trust (albeit the beneficiaries of the trust change) beneficial title to the fund never passes to the trustee or holder of the funds.

As explained by Gummow J in Re Elizabethan Theatre Trust (1991) 30 FCR 491, at 502-503; (1991) 161 ALR 105 (and see also Peter Cox Ivestments Pty Ltd (In liq) v International Air Transport Association (1991) 161 ALR 105, at [32]-[39]), Lord Wilberforce’s characterisation of the circumstances giving rise to a Quistcose trust leads to the conclusion that the trust that arises in such cases is an express trust with two limitations, rather than an express trust in favour of the intended payee (that is the beneficiary under the primary trust) and a resulting trust in favour of the original payer arising by reason of the incomplete disposition. Gummow J stated (from 691); However, in the House of Lords, Lord Wilberforce said (supra, at 580, 582) that a necessary consequence of the mutual intention of Quistclose and Rolls Razor to create arrangements which gave rise to a “primary” trust in favour of those entitled to the dividend was that if the dividend could not be paid for any reason, the money, as a “secondary” trust, was to be returned to Quistclose; the intention was clear to create the secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out. This characterisation of what occurred is indicative of an express trust with two limbs rather than an express trust in favour of the shareholders and a resulting trust in favour of Quistclose which arose by reason of an incomplete disposition by Quistclose of the whole of its interest in the money lent to Rolls Razor . But on either characterisation, Quistclose had a beneficial interest (although not at all relevant times an exclusive beneficial interest) in the money in question. Thus, it was not merely in the position of a lender with the benefit of a promise to repay. … The suggestion has been made by Professor Finn (as set out in footnote 58 to Mr Justice Priestley's paper) that in substance the trust was a security device operating for the benefit of the lender (“borrower” appears to be a mis-type); the device safeguarded its position vis-a-vis the other creditors of the financially embattled borrower, unless and until the money was applied by the borrower in the authorised manner, by payment of the dividend. Sir Peter Millett makes a related point in his article (supra, at 290–1). Hence, perhaps, the force in the caution by counsel for the bank in address to the House (supra, at 572) that if Quistclose succeeded (as proved to be the case) there would be revealed a gap in the protection given general creditors by s 95 of the Companies Act 1947 (UK), which provided that unregistered charges were void against any liquidator or creditor (cf Corporations Law, s 266). As Mr Justice Priestley pointed out in his paper (supra, at 224–5) similar concerns have attended the development of Romalpa clauses: see also the observations by Pincus J in Re Miles Ex parte National Australia Bank v Official Receiver in Bankruptcy (1988) 20 FCR 194 at 199 ; 85 ALR 216. But the essential reason the insolvency law did not strike at the transaction in question in Quistclose was that the moneys represented by the cheque drawn by Quistclose in favour of Rolls Razor and banked in the special account of Rolls Razor never at any stage became the beneficial property of Rolls Razor. It acquired no more than what Dixon J called a dry legal interest : see Commissioner for Stamp Duties (NSW) v Perpetual Trustee Co Ltd, supra, at 510. On its part, Quistclose had both contractual right to repayment out of the general assets of Rolls Razor, as a general creditor, and the beneficial interest in a fund, whether by way of resulting trust or as the second limb of an express trust. (emphasis added)

Gibbs ACJ in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (In liq) (1978) 141 CLR 335, at 353 considered that the decision in Quistclose was authority for a proposition in these terms: that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust.

However, it has not been authoritatively settled as to whether or when a resulting or express trust will result upon the application of these principles (see for example the decision of the NSWCA in Mario Salvo & 2 Ors v New Tel Limited [2005] NSWCA 281, where Spigelman CJ and Young CJ in Eq (as his Honour then was) were of the view that an express trust was created (at [53]; [96]), whereas Handley JA was of the view that a “resulting trust seems to accord more closely with the realities” (at [78]), although see also discussion by Young CJ in Eq from [84] and see the papers by Penner J., ‘Lord Millet’s Analysis, at 50 and Chambers R., ‘Restrictions on the use of money’, at 82 in Swaddling E., (ed) The Quistclose Trust: Critical Essays ).

It has later been affirmed that this principle is not limited in application to money paid over with the purpose of discharging debts, but can apply where the funds are to be applied for other purposes as well (see for example Re EVTR [1987] BCLC 646, where money was lent to buy equipment; Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742, where money was lent to subscribe for shares; see also discussion in Young, Croft and Smith, On Equity , at [6.1020]).

In On Equity, the learned authors note: Cases in this area will often depend on a close analysis of the facts, and in particular, whether the person who provided the money annexed a trust or equitable obligation that it was only to be used for the nominated purpose. The mutual intention of the parties and “the essence” of their bargain will be important. A trust will not necessarily arise just because a lender inquires into the purpose for which a loan is sought and money is paid over for that particular purpose.

In Re Australian Elizabethan Theatre Trust, Lord v Commonwealth Bank of Australia , Gummow J (in the Federal Court as his Honour then was) indicated (at 692) that it would be an error to treat the references by Lord Wilberforce in Quistclose (and by Gibbs ACJ in Australasian Conference Association , at 353) to “purpose” as characterising an express trust which did not have to satisfy the ordinary requirements for any private (as distinct from public) trust.

As with the determination of the existence and scope of an express trust, the question as to the existence of any express trust will always have to be answered by reference to intention and the relevant intention is to be inferred from the language employed by the parties in question (per Gummow J in Elizabethan Theatre Trust, at 502-505; Re Wall ; Ex parte Official Receiver v Kemmis (1979) 25 ALR 615, at 624–5). The relevant intention is to be inferred from the language employed by the parties; for that purpose the Court is entitled to look into the nature of the transaction and the circumstances of the relevant parties and their relationship: see Walker v Corboy (1990) 19 NSWLR 382; Re Australian Elizabethan Theatre Trust, at 503.

In Twinsectra, Lord Millett (at 185), indicated that simply because money is paid because of an assumption as to how it will be spent, absent an obligation to spend it so, and where the recipient is otherwise able to freely dispose of the funds, then a Quistclose trust will not arise. Lord Millet again affirmed the import of the parties intention in determining the existence or otherwise of the trust; A Quistclose trust does not necessarily arise merely because money is paid for a particular purpose. A lender will often inquire into the purpose for which a loan is sought in order to decide whether he would be justified in making it. He may be said to lend the money for the purpose in question, but this is not enough to create a trust; once lent the money is at the free disposal of the borrower. Similarly payments in advance for goods or services are paid for a particular purpose, but such payments do not ordinarily create a trust. The money is intended to be at the free disposal of the supplier and may be used as part of his cash flow. Commercial life would be impossible if this were not the case. The question in every case is whether the parties intended the money to be at the free disposal of the recipient (see Re Goldcorp Exchange Ltd (in receivership) [1994] 2 All ER 806 at 823, [1995] 1 AC 74 at 100 per Lord Mustill). His freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose, for as Lord Wilberforce observed in the Quistclose case: A necessary consequence from this, by a process simply of interpretation, must be that if, for any reason, [the purpose could not be carried out], the money was to be returned to [the lender]: the word “only” or “exclusively” can have no other meaning or effect. (See [1968] 3 All ER 651 at 654, [1970] AC 567 at 580.) In the Quistclose case a public quoted company in financial difficulties had declared a final dividend. Failure to pay the dividend, which had been approved by the shareholders, would cause a loss of confidence and almost certainly drive the company into liquidation. Accordingly the company arranged to borrow a sum of money ‘on condition that it is used to pay the forthcoming dividend’. The money was paid into a special account at the company’s bank, with which the company had an overdraft. The bank confirmed that the money would only be used for the purpose of paying the dividend due on 24 July 1964. The House held that the circumstances were sufficient to create a trust of which the bank had notice, and that when the company went into liquidation without having paid the dividend the money was repayable to the lender.

In McManus RE Pty Ltd v Ward [2009] NSWSC 440 Palmer J said in this respect (at [25]): In cases where no express or clearly implicit intention to create a trust is shown, such as where the parties give no actual thought to the matter, whether or not there was an intention that the subject monies be kept separate from the other general monies of the recipient is often decisive of the question whether the recipient is a trustee or merely a debtor: see, for example Henry v Hammond [1913] 2 KB 515, at 531; Walker v Corboy (1990) 19 NSWLR 382, at 397 to 398; Salvo (supra) at [38]; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, at 505 to 506. If the borrower in Quistclose had not set up a special and separate account to receive the loan moneys in order to pay a dividend, and if the lender had paid the moneys into the borrower’s overdraft account, it would have been impossible, on the other facts of the case, to deduce a common intention that the moneys were to be held on trust until the purpose of the loan was achieved.

In Peter Cox Investments , O’Loughlin J indicated some of the factual circumstances which might lead a court to find in favour of the existence of such a trust (from [49]), being summarised as follows: (i) whether the relationship between each client and the company was a routine commercial transaction epitomising the business that the company conducted, as courts are reluctant to introduce trusts into such commercial transactions: Walker v Corboy , at 390 per Clarke JA and at 398 per Meagher JA; (ii) the existence of discrete evidence pointing to the existence of a mutual intention of the parties to create a trust; (iii) evidence as to an agreement or directions or instructions having been given as to how and in what manner the moneys were to be held or applied; (iv) other objective indicators, such as how the recipient and alleged trustee deals with the deposited funds, alleged to be the subject of the trust, for example, whether those funds are deposited in s general bank account, which would tend against the finding of a trust (this factor was recognised by Barrett J in Georges & anor v Peter Wieland & ors [2009] NSWSC 733 (at [32]), as being an important factor in the determination of the existence of any special purpose trust; as did Spigelman CJ in Mario Salvo , at [38]); (v) whether there exists any obligation (statutory or contractual) requiring the recipient separately to account for the paid moneys.

The onus of proof lies on those who assert that a trust was created ( Peter Cox Investments, at [49]; Re Armstrong (1960) VR 202; In the matter of Travel House of Australia Pty Ltd; Browne v The Deputy Commissioner of Taxation ( Murray J, Supreme Court of Victoria, 1978, unreported).

In Re Miles; Ex parte National Australia Bank Ltd v Official Receiver in Bankruptcy (1988-89) 85 ALR 216 Pincus J indicated that the decision in Quistclose was of limited application. His Honour was of the opinion that it would not be right to apply the Quistclose principle “beyond the field defined by the House of Lords” (at p221), being the “actual payment of money by the party claiming to be the beneficiary of a resulting trust, for the purpose of discharge of debts by the payee, that purpose having failed”.

In Peter Cox Investments , O’Loughlin J (at [39]) was of a different view from that expressed by Pincus J and stated: [39] With respect, this seems to me to be an unnecessarily restrictive approach. I favour the view that Quistclose merely stands as authority for the proposition that an apparent debtor-creditor relationship can incorporate a trust relationship when such a trust relationship accords with the mutual intentions of the parties. This, I think, is a reflection of the views of Gummow J in Re Australian Elizabethan Theatre Trust

I am not satisfied that this is a case in which a Quistclose trust has arisen (nor would it have arisen even if use of the blank share transfer form had been conditioned on one or other of the events referred to in Ming Ying’s affidavit.

I therefore answer the first question in the negative. I should, however, also address the question whether Mr Song was a self appointed fiduciary, an assertion not raised until closing submissions.

In White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd & Anor [2009] NSWCA 114 , the NSWCA recently stated (from [85]): I have set out above (at [45-7]) the primary judge’s reasons for concluding that no fiduciary relationship arose. In my view, the primary judge was in error in focusing upon the question of whether the relationship of the Club and JACS generally in relation to the project was one whereunder the Club relied upon JACS to act on its behalf. The question which needed to be addressed was whether there was a fiduciary relationship between the Club and JACS specifically in relation to any exercise by JACS of the option which clause 3.7.1 of the MOU contemplated that JACS would obtain. It has rightly been said that “evaluations of contract terms between the parties is still the primary consideration in determining whether a relation is fiduciary. If there is a contract, and the contract allocates rights and duties between its parties, then fiduciary characterisation may be simple” (Glover J, Commercial Equity: Fiduciary Relationships, (1995) Butterworths, at [3.26]). The present is such a case so far as clause 3.7.1 of the MOU is concerned. As Mason J put it in Hospital Products , “the existence of a basic contractual foundation has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties” (at 97). By contractually agreeing to a provision in terms of clause 3.7.1, the Club was relevantly placing itself in the hands of JACS. From that point on it had to trust that JACS would exercise any such option “on behalf of WCH”, as it said it would. It relied on JACS commitment to do so by surrendering its rights in respect of the White City site. It was vulnerable to abuse of that commitment by JACS as such abuse might lead to the loss to the Club of the opportunity to acquire a valuable property and the opportunity to continue on the White City site an activity it had been conducting there for over 55 years.

In Brand v Monks [2009] NSWSC 1454, I noted (at [348]) that the critical feature of a fiduciary relationship (as recognised in Hospital Products ) is the undertaking or agreement to act on behalf of or in the best interests of another person in the exercise of a power or discretion which would affect in a legal or practical sense the interests of the other person. While the existence of a contract does not exclude the co-existence of concurrent fiduciary duties (and it is recognised that the contract may well be their source) (per Lord Browne-Wilkinson in Henderson v Merrett Syndicates Limited [1995] 2 AC 145, at 206) it is also recognised that “ evaluation of contract terms between the parties is still the primary consideration in determining whether a relation is fiduciary. If there is a contract, and the contract allocates rights and duties between its parties, then fiduciary characterisation may be simple ” (Glover J, Commercial Equity: Fiduciary Relationships , Butterworths, 1995, at [3.26]).

In Michael Wilson & Partners Limited v Robert Colin Nicholls [2009] NSWSC 721, Einstein J noted that contractual and fiduciary relationships may co-exist but said that “in such a case the fiduciary relationship must conform to the contract”. His Honour noted that where there is such co-existence the fiduciary relationship “owes its existence to the relationship of trust and confidence that exists between the parties so as to attract a reasonable expectation of loyalty, citing Gibson Motorsport Merchandise Pty Limited v Forbes (2006) 149 FCR 569 at 574-575, per Finn J; Rawley Pty Limited v Bell (No 2) (2007) 61 ACSR 648 at 710-711 [261]”.

A fiduciary relationship exists where a person has undertaken or agreed to act for or on behalf of or in the interests of another in the exercise of a power, and not in his own interests ( Hospital Products , Gibbs CJ, at 68-72; Mason J (as his Honour then was), at 96-97, 99, 102-103; Wilson J, at 118; Deane J, at 122-123; Dawson J, at 140-149). The duty often arises where there is a relationship of trust and confidence ( Hospital Products, Gibbs CJ, at 69) or where one person undertakes to perform a task or fulfil a duty in the interests of another ( Breen v Williams (1986) 186 CLR 710, Brennan CJ, at 820 and Gaudron and McHugh JJ, at 107).

In what is described as the well known formulation of the circumstances that give rise to fiduciary obligations ( Cordon v Lesdor [2010] NSWSC 1073, McDougall J, at [266]), Mason J (as his Honour then was) in Hospital Products , stated (at 96-97): The critical feature of these [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.

Recently, in Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229, (a decision considering whether a financial adviser owed fiduciary duties) Young JA stated (with whom Hodgson and Macfarlan JJA agreed) (from [62]): Basically, a fiduciary is a person who undertakes or had thrust upon him or her by the law an obligation to act for the benefit of another. This flows from Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41, 67. Although, as B H McPherson demonstrates in “Fiduciaries: Who are They” (1998) 72 ALJ 288 at 289, that statement is not open to too critical an examination, it is a useful starting point. As McPherson says at 290–1, the law contrasts the position of people who are at arm’s length and accordingly can act solely in their own interests with people who have assumed by contract or conduct the burden of acting in another’s interests, or to look at the matter from the other person’s viewpoint, “Have I surrendered control of this function to another in whom I have confidence will be acting in my interests?” An early statement in this area was made by Brennan J in Daly v Sydney Stock Exchange [1986] HCA 25; 160 CLR 371, 385, where he said: Whenever a … person who holds himself out as having expertise in advising on investments is approached for advise on investments and undertakes to give it, in giving that advice, the adviser stands in a fiduciary relationship to the person whom he advises. There is no doubt that at least some investment advisors will owe fiduciary duties. However, it is an error to think that merely because one can put the tag “investment advisor” on a defendant that he or she will be a fiduciary: Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165, 197. It will depend on the circumstances of the case, ASIC v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; 160 FCR 35, 75 at [266]. Examples of financial advisers not being fiduciaries are provided by Pavan v Ratnam (1996) 23 ACSR 214 (NSWCA) ; Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40 ; 33 WAR 321.

Even in relationships such as that of solicitor client, the court will still look to the particular circumstances of the relationship to determine the scope and content of the particular duty in question. As was reiterated in Beach Petroleum NL v Kennedy and Ors [1999] NSWCA 408 (1999) 48 NSWLR 1; (1999) 33 ACSR 1, where it was stated (from [187]): Whether or not there is a duty to advise on the wisdom of a particular transaction depends on the circumstances of the case: see, eg, Haira v Burbery Mortgage Finance & Savings [1995] 3 NZLR 396 at 406. Even in the case of a solicitor client relationship, long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another.

It is well-established that a person may take upon herself or himself the role of a fiduciary by a less formal arrangement than contract or by self- appointment ( Lyell v Kennedy (1889) 14 App Cas 437, at 456, 459-460; Boardman v Phipps [1967] 2 AC 46, at 100, 118, 126-127; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815, at 833; Meagher, Gummow and Lehane, Equity Doctrines and Remedies , 3rd ed (1992) Butterworths, Sydney, par 505; Parkinson (ed), The Principles of Equity (1996) LBC, Sydney at 369-370; Beach Petroleum NL v Kennedy , at [192]).

The identification of a fiduciary relationship and the determination of the scope of any such fiduciary relationship is made through examination of the nature and circumstances of the particular relationship in question rather than forming a conclusion on the basis of the particular status or label given to that relationship. For example, as explained in Beach Petroleum (at [193]) whether the relationship derives from retainer, a less formal arrangement or self-appointment, it must be examined to see what duties are thereby imposed on the fiduciary and the scope and ambit of those duties (there citing Boardman v Phipps (at 127)).

The existence and scope of the duty may derive from a course of dealing. In a passage frequently cited with approval from Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384, a partnership dispute, Dixon J, as his Honour then was, said (at 408): … The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which partnership exists; and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.

As discussed in Beach Petroleum (at [193]), ultimately a fiduciary responsibility is an imposed not an accepted one, one concerned with an imposed standard of behaviour (there referring to Finn, The Fiduciary Principle , in Youdan (ed), Equity Fiduciaries and Trusts (1989) Carswell, Toronto, at 54).

Dawson J in Hospital Products, referred (at 149) to the “undesirability of extending fiduciary duties to commercial relationships and the anomaly of imposing those duties where the parties are at arm's length from one another”.

Vulnerability of some kind, coupled with reliance, may be identified as the source of fiduciary duty. In relation to the particular case there before it, the High Court said in John Alexander's Clubs Pty Limited v White City Tennis Club Limited; Walker Corporation Pty Limited v White City Tennis Club Limited [2010] HCA 19 (at [83]): The only vulnerability of the Club was that which any contracting party has to breach by another. The only reliance was that which any contracting party has on performance by another. If JACS committed any breach of contract, it was quite open about it. If the Club could have established that JACS was in breach of contract, it had an ample array of contractual remedies to protect itself. It chose not to do so. It spoke of the difficulty of a social club giving an undertaking as to damages, and of the inutility of damages to a social club which wishes to continue its past activities in a new guise on the same site. It also said that monetary remedies against impecunious companies like JACS and Poplar were worthless. These factors do not justify converting the contractual relationship between JACS and the Club into a fiduciary relationship.

I do not consider that in the present case there is such a relationship of trust and confidence as to attract a fiduciary duty or loyalty simply because Mr Song had a better command of English than Mr Ying. (ii) Does BSS hold the sum of $116,800 on constructive trust for Ming Ying or alternatively is Ming Ying entitled to repayment of that amount as a loan owing by the company to him?

If Ming Ying’s initial version of events is right and he paid $106,000 to acquire shares in BSS (in the sense that this was the purchase price the shares) then I cannot see on any basis on which he would have an entitlement to claim $106,000 from BSS. At best, his complaint would be that (having acquired the shares) they have subsequently been transferred back (he says without his knowledge) to Lida Song. Initially the complaint seemed to be a complaint that he had not been paid for the shares transferred back to Lida Song (although no agreement in relation to that had been alleged). Then there was a complaint that the shares had been transferred in breach of a condition placed on the exercise of the right to transfer the shares back (namely that this was only to occur if Ming Ying had to go back to China) but that claim itself seems to be a claim for breach of a contractual condition which was not articulated in opening or some form of Quistclose trust which again was not the subject of any discussion in opening.

If the making of a loan to the company was the basis of the agreement to transfer shares, then the only claim against the company would be for recovery of the amount of the loan ie a claim in debt not that the company holds an amount of trust for Mr Ying. The difficulty there is that there were no terms of the loan appearing anywhere in the evidence. It might have been said that this was a loan repayable on demand or repayable on reasonable notice but there is simply a paucity of any evidence which goes to the basis on which one could find that there was a loan being made to the company as such. Furthermore, any claim against the company for the sum of $106,000 based on a loan agreement does not carry with it an entitlement for an account as to what use or benefit the company has made from the receipt of funds.

I am therefore unable to find that there was any loan made to BSS by Ming Ying.

As to the $30,770, I do not accept, on the balance of probabilities, that this was an amount that was the subject of a loan to BSS rather than an amount paid through the use of the company accounts to China as part of a separate arrangement between Lida Song and Ming Ying for the purposes of enabling Ms Ying’s release from prison in China.

As to the significance of the entries on the shareholder loan accounts, there is a paucity of any evidence as to the terms on which any amounts would have been lent to the company. Mr Lawson points to the fact that there is no evidence as to the terms of the loan said to be in place between Ming Ying and BSS and hence he submits that even if the financial statements do record a loan it cannot be said that there was a breach sufficient to sound in damages.

Mr Lawson says that if both the $106,000 and the $154,000 were loans to BSS then there would be no reason for there to be two cheques or for the two cheques to be placed in two separate accounts. That seems to me to be a compelling factor against the version of events propounded by Mr Ying.

It is further said of the $106,000 that that was not Ming Ying’s money for the purchase of shares in, nor was it a loan to, the company. It was described as the “Tam money making its way back to Mr Tam via a route which would assist Ming Ying in deceiving the Department of Immigration”. Mr Lawson submits that is the only explanation for the two cheques is that $106,000 was not money being lent to BSS.

The actual source of the moneys diverted from AIC to the BSS accounts via cheques to and from Mr Ying is unclear. However, I accept that the purpose of the money being recorded as a shareholders loan in the BSS accounts was to make it appear that Ming Ying had assets in the company. If these had been funds lent to the company then one might have expected them to be used for some purpose other than placed in a term deposit the interest from which was paid out with the principal to a third party, Mr Tam.

Mr Song's version of events is corroborated by the documents exhibited to in his affidavit of 7 October 2008 and to which both Mr Ying (T 142 and T 150) and Ms Ying were taken. Mr Lawson says that Ms Winfield's explanation that money was paid into BSS as a loan makes no sense because if so, there would be no need for the funds to remain in that term deposit and the $106,000 would not then have been remitted to Mr Tam. I agree.

I am not satisfied that there is or was at any time a loan repayable by BSS to Mr Ying in the amounts for which Mr Ying now contends. (iii) If either Lida Song does hold the shares on constructive trust for Ming Ying and/or BSS holds the sum of $116,800 on constructive trust for Ming Ying, should it account on a wilful default basis for any benefit obtained through use of the funds? Is he obliged to account on a wilful default basis for any benefits he may have received from the ownership of the shares over the relevant period?

Mr Lawson says that much of the relief which is sought on the Amended Summons is not available on the case as it unfolded at the hearing (in particular, the relief sought in paragraphs 4 to 11 of the Amended Summons). He says that there can be no order for referral out to a referee, where no referee has been put forward and there can be no mandatory declaration for the correction of the financial records of the company where all directors have not have not been made party to the proceedings.

Mr Lawson also says that evidence of Mr Huamin Yang was that he never received a dividend from the company and therefore one can infer that that no dividends were paid by the company to the shareholders and therefore there was no benefit to Lida Song in holding the shares in BSS for the period from 7 August 2005. Hence any order for an account would not be warranted.

In light of the findings I have made, it is not necessary for me to determine this third issue.

Had I found that Mr Song held the BSS shares on trust for Mr Ying then I would have been inclined to order an enquiry into the benefits obtained from the holding of the shares (except that if the evidence of Mr Yang is accepted, as I have done, there were no dividends and hence the enquiry would seem to be pointless). In such a case, however, I would have seen no basis for an inquiry as to the value of the assets of the company – if Mr Ying was entitled to the shares then he would have his own rights as a shareholder but this was not the occasion on which to explore them.

Had I found that there had been a loan to BSS (and that the company records had wrongly reflected a discharge of that loan) I nevertheless would not have found that there was any trust over the funds repayable in respect of that loan nor would I have found that BSS should account for the use or benefit of what on that hypothesis would have been loan funds it was entitled to use for its own benefit. Any remedy for Mr Ying would have been in debt, depending on whether the loan was presently due and payable. As it was, the claim against BSS seems to have been misconceived from the outset. Conclusion

For the reasons set out above, I dismiss the plaintiff’s claim. I will hear submissions as to costs at a time convenient to Counsel.